The asymmetric effects of deflation on consumption spending: Evidence from the great depression

- Expected deflation led to a reduction in department store sales in the 1930s in U.S.
- The same expected deflation did not lead to a fall in grocery store sales.
- Expected inflation did not lead to an increase in department store sales.
- Deflation may reduce durable goods purchases, not non-durable good purchases.

Using data for U.S. grocery and department store sales from 1919-1939, this paper shows that expected price changes have asymmetric effects on consumption spending. Department store sales (durable consumption) react negatively to expected deflation, but grocery sales (non-durable consumption) do not.