COVID19, Economic Expectations, and Financial Decisions

Important results from the project

To assess the impact of economic shocks and formulate effective policies, it is crucial to understand i) how households form expectations about economic foundations, and ii) how these expectations translate into financial choices. We exploit high-frequency data on consumption, savings, and investment decisions for a sample of households, paired with information experiments to exogenously shift consumer expectations. We have developed the information experiment, and the treatment videos and set up the payment system within the bank to send out the first stage of the survey.

Expected long term effects

Based on our experiment, we will be able to estimate how the perceived impact of inflation on savings, debt, and investments affects households´ actual financial decisions. We will also measure whether distorted perceptions can be reduced through an information experiment. The scientific contribution will be realized within the follow-up project where we aim to produce working papers that we will send to top peer-reviewed finance journals. Insights will be shared with decision makers in Sweden and abroad.

Approach and implementation

The survey will proceed in the following steps. 1. Stage (prior expectations): Respondents will be asked about demographics, economic situation, expectations about their own future economic situation, and macroeconomic variables (inflation). 2. Stage (treatment): random subsets of respondents get information on the differential impact of inflation on savings, debt, and investments. 3. Stage (posterior expectations): we will re-elicit the expectations. 4. Stage we will combine survey responses with administrative data.