How Does Consumption Respond to News about Inflation? Field Evidence from a Randomized Control Trial

Olivier Coibion, Dimitris Georgarakos, Yuriy Gorodnichenko and Maarten van Rooij

No 26106, NBER Working Papers from National Bureau of Economic Research, Inc

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 subsequent monthly consumption decisions relative to those in a control group. The causal effects of elevated inflation expectations on non-durable spending are imprecisely estimated but there is a sharp negative effect on durable spending. We provide evidence that this is likely driven by the fact that Dutch households seem to become more pessimistic about their real income as well as aggregate spending when they increase their inflation expectations. There is little evidence to support the idea that the degree to which respondents change their beliefs or their spending in response to information treatments depends on their level of cognitive or financial constraints.

JEL-codes: C83 D84 E31 (search for similar items in EconPapers)
Date: 2019-07
New Economics Papers: this item is included in nep-exp, nep-mac and nep-mon
Note: EFG IFM ME
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Citations: View citations in EconPapers (82)

Published as Olivier Coibion & Dimitris Georgarakos & Yuriy Gorodnichenko & Maarten van Rooij, 2023. "How Does Consumption Respond to News about Inflation? Field Evidence from a Randomized Control Trial," American Economic Journal: Macroeconomics, vol 15(3), pages 109-152.

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