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Monetary policy shocks from the consumer perspective

Edda Claus () and Viet Hoang Nguyen

Journal of Monetary Economics, 2020, vol. 114, issue C, 159-173

Abstract: Applying a latent factor model to survey expectations data on economic conditions, unemployment, family finances, and readiness to spend reveals that, following a monetary policy shock, consumer expectations adjust in the direction predicted by standard models. Further, expectations respond asymmetrically to policy tightenings or easings, are sluggish, and are consistent with an income channel of monetary policy. Inflation expectations are at first anchored, but significantly adjust in the long run, in a way that is consistent with a Delphic effect of monetary policy. Expectations are heterogeneous according to gender, income, and housing status in systematic ways.

Keywords: Monetary policy shocks; Heterogeneous consumers; Expectations formation; Latent factor model; Nonlinear autoregressive distributed lag model (search for similar items in EconPapers)
JEL-codes: E21 E52 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1016/j.jmoneco.2019.03.012

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