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  • 2020
  • Working Paper
  • HBS Working Paper Series

Inflation with COVID Consumption Baskets

By: Alberto Cavallo
  • Format:Print
  • | Language:English
  • | Pages:22
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Abstract

The COVID-19 Pandemic has led to changes in expenditure patterns that can introduce significant bias in the measurement of Consumer Price Index (CPI) inflation. I use publicly-available data on credit and debit card transactions to update the official CPI weights and re-calculate inflation with COVID consumption baskets. I find that the US CPI underestimated the COVID inflation rate, particularly during the first three months of the Pandemic, as consumers spent relatively more on food and categories with higher inflation, and less on transportation and other categories experiencing deflation. By September, U.S. COVID inflation was 1.90% compared to 1.41% in the official CPI, and was impacting low-income households the most. I also find evidence of higher COVID inflation in 12 out of 19 additional countries.

Keywords

Covid; Consumer Expenditures; Cpi; Inflation; Health Pandemics; Consumer Behavior; Spending; Inflation And Deflation; Global Range

Citation

Cavallo, Alberto. "Inflation with COVID Consumption Baskets." NBER Working Paper Series, No. 27352, June 2020. (Revised October 2020. Harvard Business School Working Paper, No. 20-124, May 2020)

Supplemental Information

Online Appendix
Provides additional details, including results for other countries.
Replication Data and Code
NBER Working Paper
Updated Graphs and Data
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About The Author

Alberto F. Cavallo

Business, Government and the International Economy
→More Publications

More from the Author

    • March, 2021
    • American Economic Review: Insights

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    Targeted Price Controls on Supermarket Products

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    The Coronavirus (COVID-19) Pandemic and the Global Economy (B)

    By: Alberto Cavallo and Christian Godwin
More from the Author
  • Tariff Passthrough at the Border and at the Store: Evidence from U.S. Trade Policy By: Alberto Cavallo, Gita Gopinath, Brent Neiman and Jenny Tang
  • Targeted Price Controls on Supermarket Products By: Alberto Cavallo and Diego Aparicio
  • The Coronavirus (COVID-19) Pandemic and the Global Economy (B) By: Alberto Cavallo and Christian Godwin
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