Monetary Policy Communications and their Effects on Household Inflation Expectations

Olivier Coibion, Yuriy Gorodnichenko and Michael Weber

No 25482, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We study how different forms of communication influence inflation expectations in a randomized controlled trial using nearly 20,000 U.S. individuals. We elicit individuals’ inflation expectations in the Nielsen Homescan panel 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 which is smaller by half. This exogenous variation in inflation expectations has subsequent effects on household spending. Our results have implications for how central banks should communicate to the broader public.

JEL-codes: C83 D84 E31 (search for similar items in EconPapers)
Date: 2019-01
New Economics Papers: this item is included in nep-cba, nep-exp and nep-mac
Note: EFG ME
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Citations: View citations in EconPapers (196)

Published as Olivier Coibion & Yuriy Gorodnichenko & Michael Weber, 2022. "Monetary Policy Communications and Their Effects on Household Inflation Expectations," Journal of Political Economy, vol 130(6), pages 1537-1584.

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Journal Article: Monetary Policy Communications and Their Effects on Household Inflation Expectations (2022)
Working Paper: Monetary Policy Communications and their Effects on Household Inflation Expectations (2019)
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