Managing Households' Expectations with Unconventional Policies

By Francesco D’acunto, Daniel Hoang, Michael Weber. The Review of financial studies, 2020

126 citations recorded by the source corpus.

Binding lower bounds on interest rates and large government deficits limit the scope of fiscal and monetary policies to stimulate households’ spending through financial intermediaries and firms. Policy makers have thus been implementing unconventional policies that aim to increase households’ spending directly through managing their expectations. We first show theoretically and empirically that higher inflation expectations increase households’ consumption. We then design a difference-in-differences strategy to assess the effectiveness of unconventional fiscal policy and forward guidance, both of which aim to raise aggregate demand via managing expectations. Whereas unconventional fiscal policy increases households’ expectations and spending, forward guidance announcements do not

Subfields: Accounting, Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/c99546c1d3c92c792d4704d5c56c4bf55917215f

Citations in the corpus

• Monetary Policy Communications and Their Effects on Household Inflation Expectations (2018, unknown): “D’Acunto et al. (2016) find large differences in how individuals adjust consumption plans to their inflation expectations by demographics.”