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Central bank announcements: Big news for little people?

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  • Lamla, Michael J.
  • Vinogradov, Dmitri V.

Abstract

Little is known on how and whether central bank announcements affect consumers’ beliefs about policy-relevant economic figures. This paper focuses on consumers’ perceptions and expectations of inflation and interest rates and confidence therein. Based on a sound identification (running surveys shortly before and after communication events), and relying on above 15,000 observations, spanning over 12 FOMC press conferences between December 2015 and June 2018, we document the impact of the central bank communication on the general public. While announcement events have no measurable direct effect on average beliefs, they make people more likely to receive news about the central bank’s policy. In general, informed consumers tend to have lower perceptions and expectations, higher confidence and, at least for perceived inflation, smaller errors.

Suggested Citation

  • Lamla, Michael J. & Vinogradov, Dmitri V., 2019. "Central bank announcements: Big news for little people?," Journal of Monetary Economics, Elsevier, vol. 108(C), pages 21-38.
  • Handle: RePEc:eee:moneco:v:108:y:2019:i:c:p:21-38
    DOI: 10.1016/j.jmoneco.2019.08.014
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    Cited by:

    1. Carola Binder, 2020. "Coronavirus Fears and Macroeconomic Expectations," The Review of Economics and Statistics, MIT Press, vol. 102(4), pages 721-730, October.
    2. Yuriy Gorodnichenko & Tho Pham & Oleksandr Talavera, 2021. "The Voice of Monetary Policy," NBER Working Papers 28592, National Bureau of Economic Research, Inc.
    3. Olivier Coibion & Dimitris Georgarakos & Yuriy Gorodnichenko & Michael Weber, 2020. "Forward Guidance and Household Expectations," Working Papers 2020-07, Becker Friedman Institute for Research In Economics.
    4. Coibion, Olivier & Gorodnichenko, Yuriy & Weber, Michael, 2020. "Does Policy Communication during COVID-19 Work?," IZA Discussion Papers 13355, Institute of Labor Economics (IZA).
    5. Coibion, Olivier & Gorodnichenko, Yuriy & Weber, Michael, 2020. "Does Policy Communication During COVID Work?," Department of Economics, Working Paper Series qt19b8p8g1, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
    6. Candia, Bernardo & Coibion, Olivier & Gorodnichenko, Yuriy, 2021. "The Inflation Expectations of U.S. Firms: Evidence from a New Survey," IZA Discussion Papers 14378, Institute of Labor Economics (IZA).
    7. Alexander Jung & Patrick Kuehl, 2021. "Can central bank communication help to stabilise inflation expectations?," Scottish Journal of Political Economy, Scottish Economic Society, vol. 68(3), pages 298-321, July.
    8. Fiorella De Fiore & Marco Jacopo Lombardi & Johannes Schuffels, 2021. "Are households indifferent to monetary policy announcements?," BIS Working Papers 956, Bank for International Settlements.
    9. Martin Geiger & Marios Zachariadis, "undated". "Consumers' updating, policy shocks and public debt: An empirical assessment of state dependencies," Arbeitspapiere 69, Liechtenstein-Institut.
    10. Jmaes McNeil, 2020. "Monetary policy and the term structure of Inflation expectations with information frictions," Working Papers daleconwp2020-07, Dalhousie University, Department of Economics.
    11. Bernardo Candia & Olivier Coibion & Yuriy Gorodnichenko, 2020. "Communication and the Beliefs of Economic Agents," NBER Working Papers 27800, National Bureau of Economic Research, Inc.
    12. Dmitri Vinogradov & Yousef Makhlouf, 2021. "Signaling probabilities in ambiguity: who reacts to vague news?," Theory and Decision, Springer, vol. 90(3), pages 371-404, May.
    13. Fraccaroli, Nicolò & Giovannini, Alessandro & Jamet, Jean-Francois, 2020. "Central banks in parliaments: a text analysis of the parliamentary hearings of the Bank of England, the European Central Bank and the Federal Reserve," Working Paper Series 2442, European Central Bank.
    14. Kryvtsov, Oleksiy & Petersen, Luba, 2021. "Central bank communication that works: Lessons from lab experiments," Journal of Monetary Economics, Elsevier, vol. 117(C), pages 760-780.
    15. Glas, Alexander & Müller, Lena, 2021. "Talking in a language that everyone can understand? Transparency of speeches by the ECB Executive Board," FAU Discussion Papers in Economics 01/2021, Friedrich-Alexander University Erlangen-Nuremberg, Institute for Economics.
    16. Yuriy Gorodnichenko & Tho Pham & Oleksandr Talavera, 2021. "'Liked', 'Shared', 'Commented': Central Bank Communication on Facebook and Twitter," Discussion Papers 21-05, Department of Economics, University of Birmingham.
    17. Goyal, Ashima & Parab, Prashant, 2021. "What influences aggregate inflation expectations of households in India?," Journal of Asian Economics, Elsevier, vol. 72(C).
    18. Conrad, Christian & Enders, Zeno & Glas, Alexander, 2020. "The role of information and experience for households' inflation expectations," Working Papers 20, German Research Foundation's Priority Programme 1859 "Experience and Expectation. Historical Foundations of Economic Behaviour", Humboldt University Berlin.
    19. Ehrmann, Michael & Wabitsch, Alena, 2021. "Central bank communication with non-experts: a road to nowhere?," Working Paper Series 2594, European Central Bank.
    20. Baumann, Ursel & Darracq Pariès, Matthieu & Westermann, Thomas & Riggi, Marianna & Bobeica, Elena & Meyler, Aidan & Böninghausen, Benjamin & Fritzer, Friedrich & Trezzi, Riccardo & Jonckheere, Jana & , 2021. "Inflation expectations and their role in Eurosystem forecasting," Occasional Paper Series 264, European Central Bank.
    21. Baranowski, Paweł & Doryń, Wirginia & Łyziak, Tomasz & Stanisławska, Ewa, 2021. "Words and deeds in managing expectations: Empirical evidence from an inflation targeting economy," Economic Modelling, Elsevier, vol. 95(C), pages 49-67.
    22. Binder, Carola Conces, 2020. "Long-run inflation expectations in the shrinking upper tail," Economics Letters, Elsevier, vol. 186(C).

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    More about this item

    Keywords

    Perceptions; Expectations; Central bank communication; Consumers;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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