Forward Guidance and Household Expectations

Olivier Coibion, Dimitris Georgarakos, Yuriy Gorodnichenko and Michael Weber

No 12979, IZA Discussion Papers from IZA Network @ LISER

Abstract: We compare the causal effects of forward guidance communication about future interest rates on households' expectations of inflation, mortgage rates, and unemployment to the effects of communication about future inflation in a randomized controlled trial using more than 25,000 U.S. individuals in the Nielsen Homescan panel. We elicit individuals' expectations and then provide 22 different forms of information regarding past, current and/or future inflation and interest rates. Information treatments about current and next year's interest rates have a strong effect on household expectations but treatments beyond one year do not have any additional impact on forecasts. Exogenous variation in inflation expectations transmits into other expectations. The richness of our survey allows us to better understand how individuals form expectations about macroeconomic variables jointly and the non-response to long-run forward guidance is consistent with models in which agents have constrained capacity to collect and process information.

Keywords: communication; surveys; inflation expectations; expectations management; randomized controlled trial (search for similar items in EconPapers)
JEL-codes: C83 D84 E31 (search for similar items in EconPapers)
Pages: 77 pages
Date: 2020-02
New Economics Papers: this item is included in nep-exp, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (74)

Published - published in: Journal of the European Economic Association, 2023, 21 (5), 2131–217

Downloads: (external link)
https://docs.iza.org/dp12979.pdf (application/pdf)

Related works:
Journal Article: Forward Guidance and Household Expectations (2023)
Working Paper: Forward Guidance and Household Expectations (2023)
Working Paper: Forward Guidance and Household Expectations (2022)
Working Paper: Forward Guidance and Household Expectations (2020)
Working Paper: Forward Guidance and Household Expectations (2020)
Working Paper: Forward Guidance and Household Expectations (2020)
Working Paper: Forward Guidance and Household Expectations (2020)
Working Paper: Forward Guidance and Household Expectations (2020)
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