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Monetary Policy Communications and Their Effects on Household Inflation Expectations

Author

Listed:
  • Olivier Coibion
  • Yuriy Gorodnichenko
  • Michael Weber

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.

Suggested Citation

  • Olivier Coibion & Yuriy Gorodnichenko & Michael Weber, 2022. "Monetary Policy Communications and Their Effects on Household Inflation Expectations," Journal of Political Economy, University of Chicago Press, vol. 130(6), pages 1537-1584.
    • Handle: RePEc:ucp:jpolec:doi:10.1086/718982
    DOI: 10.1086/718982
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    JEL classification:

    • C83 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Survey Methods; Sampling Methods
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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