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

• DOI: 10.1257/mac.20200445
• Publication Date: 2023-06-30T12:29:54Z
• Authors: Olivier Coibion; Dimitris Georgarakos; Yuriy Gorodnichenko; Maarten van Rooij
• Keywords: Consumption; Affect; Consumer spending

We implement a survey of Dutch households in which random subsets respondents receive information about inflation. The resulting exogenously generated variation inflation expectations is used to assess how affect consumption decisions. causal effects reduced on nondurable spending are imprecisely estimated, but there sharp positive effect durable spending. This likely driven by the fact that seem become more optimistic their real income and aggregate when they decrease expectations. find little role for cognitive or financial constraints explaining responses. (JEL C83, D12, D83, D84, E21, E31)