Fiscal stimulus plans and households' expectations

Fiorella De Fiore, Marco Lombardi and Albert Pierres Tejada

No 1238, BIS Working Papers from Bank for International Settlements

Abstract: Fiscal decisions develop through multiple stages of political discussions and lengthy legislative processes. We propose a measure of public attention to fiscal policy news based on Google Trends and investigate the reaction of households' expectations when attention is highest. We focus on three large U.S. fiscal stimulus plans: the CARES Act, the American Rescue Plan, and the Tax Cuts and Jobs Act. We find that attention peaks when the plan is approved by Congress or signed by the President. On those dates, financially literate households significantly adjust their expectations: those of inflation and earnings increase, while those of unemployment decline.

Keywords: inflation expectations; fiscal policy; stimulus plans; households (search for similar items in EconPapers)
JEL-codes: E30 E40 E50 E70 (search for similar items in EconPapers)
Date: 2024-12
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