Transcript presentation file

Comment for Surveys and
Forecasts Session
Claudia R. Sahm
Federal Reserve Board
May 13, 2008
Micro Survey Data Can Inform
Macroeconomic Forecasts
• Test behavioral models and aid in
interpreting forecasts
• Add covariates to forecast models, such
as, consumer or business sentiment
• Calibrate special factors, such as tax
rebate spending propensities
Example: Tax Rebate Question
Consumers are markedly more pessimistic
now than in 2001, so should we expect
them to spend more or less of the current
rebates than in 2001?
• Spend Less: Precautionary motives
• Spend More: Liquidity constrained
Empirical question which effect dominates…
Index of Consumer Sentiment
110
100
90
80
70
60
Jan-01
Jan-02
Jan-03
Jan-04
Dec-04
Dec-05
Dec-06
Dec-07
• Sentiment is 20+ points lower than before 2001 rebates
• More pessimistic about personal and business conditions
Survey Question
This year (it is likely that) tax rebates will be mailed to most
individuals. In most cases, the tax rebate will be $600 for
individuals and $1200 for married couples. Those with
dependent children will receive an additional $300 per child.
Individuals earning more than $75,000 and married couples
earning more than $150,000 will get smaller tax rebates or
no tax rebate at all.
Thinking about your (family’s) financial situation this year,
will the tax rebate lead you mostly to increase spending,
mostly to increase saving, or mostly to pay off debt?
Previous Research
Similar questions by Shapiro and Slemrod on the
Reuters/UM Surveys of Consumers for 1992 tax
withholding change, 2001 rebates and tax cuts, and
2003 child tax credits and withholding
• 1992: Shapiro and Slemrod (AER 1995)
• 2001: Shapiro and Slemrod (AER 2003)
• 2003: Coronado, Lupton, Sheiner (WP 2005)
Rebate Plans in 2008
Plan for Rebate
Spend
Save
Pay off Debt
Total Responses
% No Rebate
Consumer Sentiment
% of Recipients
2008
2001
20
22
31
32
49
46
1,447
1,444
7
15
67.7
85.3
Note: Author's tabulation for February to April 2008
surveys. Shapiro and Slemrod's (2003) tabulations for
August to October 2001. All statistics weighted and
exclude individuals who report that they will not receive a
rebate or do not report a spending/saving plan.
Relationship with Sentiment
Percent with Response
Spend
Pay off Debt
Save
Sentiment / 10
0.010
-0.014
0.004
(0.002)
(0.004)
(0.003)
Note: Author's tabulation of 2008 responses. Each column is
a weighted linear probability model that includes a constant
term. Estimates in bold statistically different from zero at 5%
• Large differences in total sentiment
associated with small effects on rebate plans
• Patterns differ within economic saving
• Subcomponents tell a richer story
Data Interpretation Issues
• Difficult to assess the counterfactual
– Use cognitive interviews, survey methods
• Difficult to map to economic theory
– Data is “endogenous” can add questions
• Intentions may differ from actual behavior
– Survey pre- and post- rebate receipt
– Follow-up questions to clarify plan
Appendix: ICS Questions
• Would you say you (and your family living there) are better off or
worse off financially than you were a year ago?
• Do you think that a year from now you (and your family living there)
will be better off financially, or worse off, or just about the same as
now?
• Now turning to business conditions in the country as a whole -- do
you think that during the next 12 months we’ll have good times
financially, or bad times, or what?
• Looking ahead, which would you say is more likely – that in the
country as a whole we’ll have continuous good times during the next
5 years or so, or that we’ll have periods of widespread
unemployment or depression, or what?
• Generally speaking, do you think now is a good time or bad time for
people to buy major household item?
See Reuters/UM Surveys of Consumers website for more details.