Inflation with Covid Consumption Baskets

18 Pages Posted: 15 Jun 2020 Last revised: 27 Jun 2021

See all articles by Alberto Cavallo

Alberto Cavallo

Harvard University - Business School (HBS)

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Date Written: June 2020

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.

Suggested Citation

Cavallo, Alberto, Inflation with Covid Consumption Baskets (June 2020). NBER Working Paper No. w27352, Available at SSRN: https://ssrn.com/abstract=3626853

Alberto Cavallo (Contact Author)

Harvard University - Business School (HBS) ( email )

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