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Working Paper

News and uncertainty about COVID-19: Survey evidence and short-run economic impact

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A tailor-made survey documents consumer perceptions of the U.S. economy’s response to a large shock: the advent of the COVID-19 pandemic. The survey ran at a daily frequency between March 2020 and July 2021. Consumer perceptions regarding output and inflation react rapidly. Uncertainty is pervasive. A business-cycle model calibrated to the consumer views provides an interpretation. The rise in household uncertainty amplifies the pandemic recession by a factor of three. Different perceptions about monetary policy can explain why consumers and professional forecasters agree on the recessionary impact, but have sharply divergent views about inflation.
Topics
Public health crises
Monetary policy
12.21.2021ISSN 2573-7953 WP 20-12ROriginal Paper WP 20-12DOI 10.26509/frbc-wp-202012r
Keywords Consumer expectations, Survey, Large shock, Uncertainty, Monetary Policy
JEL Classification Codes C83, E32, E52

Working Papers of the Federal Reserve Bank of Cleveland are preliminary materials circulated to stimulate discussion and critical comment on research in progress. They may not have been subject to the formal editorial review accorded official Federal Reserve Bank of Cleveland publications. The views expressed in this paper are those of the authors and do not represent the views of the Federal Reserve Bank of Cleveland or the Federal Reserve System.

Suggested Citation

Dietrich, Alexander M., Keith Kuester, Gernot J. Müller, and Raphael S. Schoenle. 2021. “News and uncertainty about COVID-19: Survey evidence and short-run economic impact.” Federal Reserve Bank of Cleveland, Working Paper No. 20-12R. https://doi.org/10.26509/frbc-wp-202012r