Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/242892
Authors: 
Jaravel, Xavier
O'Connell, Martin
Year of Publication: 
2020
Series/Report no.: 
IFS Working Paper No. W20/33
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.
Subjects: 
inflation
Great Lockdown
JEL: 
D12
E31
I30
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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