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High-frequency changes in shopping behaviours, promotions and the measurement of inflation: evidence from the Great Lockdown

Jaravel, Xavier and O'Connell, Martin (2020) High-frequency changes in shopping behaviours, promotions and the measurement of inflation: evidence from the Great Lockdown. Fiscal Studies, 41 (3). 733 - 755. ISSN 0143-5671

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Identification Number: 10.1111/1475-5890.12241

Abstract

We use real-time scanner data in Great Britain during the COVID-19 pandemic to investigate the drivers of the inflationary spike at the beginning of lockdown and to quantify the impact of high-frequency changes in shopping behaviours and promotions on inflation measurement. Although changes in product-level expenditure shares were unusually high during lockdown, we find that the induced bias in price indices that do not account for expenditure switching is not larger than in prior years. We also document substantial consumer switching towards online shopping and across retailers, but show this was not a key driver of the inflationary spike. In contrast, a reduction in price and quantity promotions was key to driving higher inflation, and lower use of promotions by low-income consumers explains why they experienced moderately lower inflation. Overall, changes in shopping behaviours played only a minor role in driving higher inflation during lockdown; higher prices were the main cause, in particular through a reduced frequency of promotions.

Item Type: Article
Official URL: https://onlinelibrary.wiley.com/journal/14755890
Additional Information: © 2020 The Authors
Divisions: Economics
Subjects: H Social Sciences > HG Finance
R Medicine > RA Public aspects of medicine > RA0421 Public health. Hygiene. Preventive Medicine
H Social Sciences > HV Social pathology. Social and public welfare. Criminology
JEL classification: D - Microeconomics > D1 - Household Behavior and Family Economics > D12 - Consumer Economics: Empirical Analysis
E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E31 - Price Level; Inflation; Deflation
I - Health, Education, and Welfare > I3 - Welfare and Poverty > I30 - General
Date Deposited: 10 Dec 2020 14:21
Last Modified: 20 Jul 2021 03:01
URI: http://eprints.lse.ac.uk/id/eprint/107828

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