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The Causal Effects of Inflation Expectations on Households' Beliefs and Actions

Author

Listed:
  • Olivier Coibion
  • Yuriy Gorodnichenko

Abstract

We discuss how Randomized Control Trials (RCTs) can be used to study the causal effects of inflation expectations on the decisions of households. RCTs create exogenous variation in the inflation expectations of survey participants. When linked to either external information on their actions or subsequent survey waves that measure their ex-post decisions, this can provide clear causal identification of expectations on decisions. We review recent evidence using this strategy and discuss potential challenges associated with this approach.

Suggested Citation

  • Olivier Coibion & Yuriy Gorodnichenko, 2024. "The Causal Effects of Inflation Expectations on Households' Beliefs and Actions," RBA Annual Conference Papers acp2024-05, Reserve Bank of Australia, revised May 2025.
    • Handle: RePEc:rba:rbaacp:acp2024-05
    Note: Paper presented at the RBA's annual conference 'Central Bank Communications', Sydney, 14–15 October 2024.
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    File URL: https://www.rba.gov.au/publications/confs/2024/pdf/rba-conference-2024-coibion-gorodnichenko.pdf
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