Monetary Policy Communications and Their Effects on Household Inflation Expectations

Olivier Coibion, Yuriy Gorodnichenko and Michael Weber

Journal of Political Economy, 2022, vol. 130, issue 6, 1537 - 1584

Abstract: 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.

Date: 2022
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Related works:
Working Paper: Monetary Policy Communications and their Effects on Household Inflation Expectations (2019)
Working Paper: Monetary Policy Communications and their Effects on Household Inflation Expectations (2019)
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