Monetary Policy Communications and Their Effects on Household Inflation Expectations

By Olivier Coibion, Y. Gorodnichenko, Michael Weber. Journal of Political Economy, 2018

400 citations recorded by the source corpus.

We study how different forms of communication influence inflation expectations in a randomized controlled trial using nearly 20,000 US individuals. We elicit individuals’ inflation expectations and then provide eight different forms of information regarding inflation. Reading the actual Federal Open Market Committee (FOMC) statement has about the same average effect on expectations as simply being told about the Federal Reserve’s inflation target. Reading news articles about the most recent FOMC meetings results in a forecast revision that is smaller by half. This exogenous variation in inflation expectations has subsequent effects on household spending reported in scanner and survey data.

Subfields: Economics and Econometrics, Sociology and Political Science

View Paper: https://www.semanticscholar.org/paper/e876fadc9cda257ebfbc5ad02d69f8b395fb5c07

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Citations in the corpus

The Voice of Monetary Policy (2021, positive): “…example, a large number of studies have documented the effectiveness of policy announcements in moving financial markets (e.g., Kuttner, 2001; Gurkaynak et al., 2005) or shaping firm and household inflation expectations (e.g., Coibion et al., 2019; Enders et al., 2019; Lamla and Vinogradov, 2019).”
The Effect of Macroeconomic Uncertainty on Household Spending (2021, positive): “Dietrich et al. (2022) consider the possible implications of the rise in uncertainty during the COVID-19 pandemic.”
The Cost of the Covid-19 Crisis: Lockdowns, Macroeconomic Expectations, and Consumer Spending (2020, positive): “During the binding lower bound on nominal interest rates, inflation expectations translate oneto-one into changes in real interest rates (Euler equation) which can directly impact current and future consumption choices (Coibion et al. 2019, D’Acunto et al. 2016).”
News and uncertainty about COVID-19: Survey evidence and short-run economic impact (2020, positive): “Carroll (2003) and Larsen et al. (2021) show how media coverage may affect consumers’ inﬂation expectations, while, for example, Candia et al. (2020) and Coibion et al. (2022) study the role of policy communication.”
Coronavirus Fears and Macroeconomic Expectations (2020, neutral): “…range of 0% to 4% in both cases.14 The signal about the Fed’s March 3 announcement and rate cut appears to be an exception to the finding in Coibion et al. (2019) that “there is in general little variation in terms of how different types of consumers respond to most signals: conditional…”
Risk Perception Through the Lens of Politics in the Time of the COVID-19 Pandemic (2020, positive): “…of critical interest to policymakers and academics alike.1 An emerging paradigm in this literature suggests that individuals exhibit considerable heterogeneity in expectations (e.g., D’Acunto et al., 2018; D’Acunto et al. 2019a; D’Acunto et al. 2019b; Gennaioli et al., 2016; Coibion et al., 2019).”
Labor Markets During the COVID-19 Crisis: A Preliminary View (2020, neutral): “Fetzer et al. (2020) show the arrival of the corona virus in a country leads to a large increase in internet searches around the world. In a survey experiment on a U.S. population, they find survey participants vastly overestimate the mortality rate and extent of contagion. Barrios and Hochberg (202”