An experiment on consumption responses to future price and interest rates
Research output: Chapter in Book/Report/Conference proceeding › Chapter (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.
|Title of host publication||Experiments in macroeconomics|
|Publisher||Emerald Group Publishing Limited|
|Publication status||Published - Nov 2014|
|Name||Research in Experimental Economics|