Effective policy communication: Targets versus instruments

Francesco D'Acunto, Daniel Hoang, Maritta Paloviita and Michael Weber

No 17/2020, Bank of Finland Research Discussion Papers from Bank of Finland

Abstract: Communication targeting households and firms has become a stand-alone policy tool of many central banks. But which forms of communication, if any, can reach ordinary people and manage their economic expectations effectively? In a large-scale randomized control trial, we show that communication manages expectations when it focuses on policy targets and objectives rather than on the instruments designed to reach such objectives. It is especially the least sophisticated demographic groups, whom central banks typically struggle to reach, who react more to target-based communication. When exposed to target-based communication, these groups are also more likely to believe that policies will benefit households and the economy. Target-based communication enhances policy effectiveness and contributes to strengthen the public's trust in central banks, which is crucial to ensure the effectiveness of their policies.

Keywords: Behavioral Macroeconomics; Heterogeneous Beliefs; Limited Cognition; Expectations Formation; Household Finance (search for similar items in EconPapers)
JEL-codes: D12 D84 D91 E21 E31 E32 E52 E65 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (21)

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/240340/1/BoF-DP-2017.pdf (application/pdf)

Related works:
Working Paper: Effective policy communication: Targets versus instruments (2021)
Working Paper: Effective Policy Communication: Targets versus Instruments (2020)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:zbw:bofrdp:rdp2020_017

Access Statistics for this paper

More papers in Bank of Finland Research Discussion Papers from Bank of Finland Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().