Monetary policy shocks and consumer expectations in the euro area

We study how consumers assess the effects of monetary policy shocks in euro area countries using survey data. Our findings provide evidence that consumers form expectations in a way that is broadly consistent with empirical and theoretical models of the monetary transmission mechanism, both at the aggregate level and at the country level. Although the euro area countries are characterized by economic and institutional heterogeneity, consumers' interpretations of the macroeconomic effects of monetary policy are relatively homogenous. Monetary policy is particularly effective in coordinating consumer price expectations, while the updating of unemployment expectations is more disperse across countries.