Do people understand monetary policy?

Carlos Carvalho and Fernanda Nechio

Journal of Monetary Economics, 2014, vol. 66, issue C, 108-123

Abstract: We combine questions from the Michigan Survey about future inflation, unemployment, and interest rates to investigate whether households are aware of the basic features of U.S. monetary policy. Our findings provide evidence that some households form their expectations in a way that is consistent with a Taylor (1993)-type rule. We also document a large degree of variation in the pattern of responses over the business cycle. In particular, the negative relationship between unemployment and interest rates that is apparent in the data only shows up in households׳ answers during periods of labor market weakness.

Keywords: Survey data; Monetary policy; Communication; Taylor rule; Inflation expectations; Michigan Survey; Survey of Professional Forecasters (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (148)

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Related works:
Working Paper: Do People Understand Monetary Policy? (2013)
Working Paper: Do people undestand monetary policy? (2012)
Working Paper: Do People Understand Monetary Policy? (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:66:y:2014:i:c:p:108-123

DOI: 10.1016/j.jmoneco.2014.04.013

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