NBER

Alberto Cavallo

Bibliographic Information

NBER Working Paper No. 27352
Issued in June 2020, Revised in July 2020
NBER Program(s):IFM, ME

A non-technical summary of this paper is available in the August 2020 NBER Digest.  You can sign up to receive the NBER Digest by email.

This paper was revised on July 23, 2020

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Abstract

The Covid-19 Pandemic has led to changes in consumer expenditure patterns that can introduce significant bias in the measurement of inflation. I use data collected from credit and debit transactions in the US to update the official basket weights and estimate the impact on the Consumer Price Index (CPI). I find that the Covid inflation rate is higher than the official CPI in the US, for both headline and core indices. I also find similar results with Covid baskets in 10 out of 16 additional countries. The difference is significant and growing over time, as social-distancing rules and behaviors are making consumers spend relatively more on food and other categories with rising inflation, and relatively less on transportation and other categories experiencing significant deflation.

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