How Does Consumption Respond to News about Inflation? Field Evidence from a Randomized Control Trial
American Economic Journal: Macroeconomics
vol. 15,
no. 3, July 2023
(pp. 109-52)
Abstract
We implement a survey of Dutch households in which random subsets of respondents receive information about inflation. The resulting exogenously generated variation in inflation expectations is used to assess how expectations affect consumption decisions. The causal effects of reduced inflation expectations on nondurable spending are imprecisely estimated, but there is a sharp positive effect on durable spending. This is likely driven by the fact that Dutch households seem to become more optimistic about their real income and aggregate spending when they decrease their inflation expectations. We find little role for cognitive or financial constraints in explaining spending responses.Citation
Coibion, Olivier, Dimitris Georgarakos, Yuriy Gorodnichenko, and Maarten van Rooij. 2023. "How Does Consumption Respond to News about Inflation? Field Evidence from a Randomized Control Trial." American Economic Journal: Macroeconomics, 15 (3): 109-52. DOI: 10.1257/mac.20200445Additional Materials
JEL Classification
- C83 Survey Methods; Sampling Methods
- D12 Consumer Economics: Empirical Analysis
- D83 Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
- D84 Expectations; Speculations
- E21 Macroeconomics: Consumption; Saving; Wealth
- E31 Price Level; Inflation; Deflation
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