How Does Household Spending Respond to an Epidemic? Consumption During the 2020 COVID-19 Pandemic

R.A. Farrokhnia · Steffen Meyer · Michaela Pagel · Constantine Yannelis

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COVID-19 Pandemic Impacts Monetary Policy and Economic Impact Economics of Agriculture and Food Markets

Abstract

We explore how household consumption responds to epidemics, utilizing transaction-level household financial data to investigate the impact of the COVID-19 virus.As the number of cases grew, households began to radically alter their typical spending across a number of major categories.Initially spending increased sharply, particularly in retail, credit card spending and food items.This was followed by a sharp decrease in overall spending.Households responded most strongly in states with shelter-in-place orders in place by March 29th.We explore heterogeneity across partisan affiliation, demographics and income.Greater levels of social distancing are associated with drops in spending, particularly in restaurants and retail.

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