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An experiment on consumption responses to future price and interest rates

Research output: Chapter in Book/Report/Conference proceedingChapter (peer-reviewed)peer-review

We design an experiment to investigate the influence of announced future variations in interest rates and prices on consumption decisions. In an experimental implementation of the discounted utility model, the subjects learn the entire paths of inflation and interest rates prior to deciding on a consumption path. We decompose the total change in consumption that results from changes in either interest rates or inflation rates into anticipation and impact effects. While impact effects are of similar orders of magnitude as in the model, future changes in inflation or interest rates exert substantially smaller effects on current consumption than predicted by the model.
Original languageEnglish
Title of host publicationExperiments in macroeconomics
EditorsJohn Duffy
PublisherEmerald Group Publishing Limited
Pages139-166
ISBN (Electronic)978-1-78441-194-7
ISBN (Print)978-1-78441-195-4
DOIs
Publication statusPublished - Nov 2014

Publication series

NameResearch in Experimental Economics
Volume17
ISSN (Print)0193-2306

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