Working Paper: CEPR ID: DP15307
Authors: Olivier Coibion; Yuriy Gorodnichenko; Edward S. Knotek II; Raphael Schoenle
Abstract: Using a daily survey of U.S. households, we study how the Federal Reserve’s announcement of its new strategy of average inflation targeting affected households’ expectations. Starting with the day of the announcement, there is a very small uptick in the minority of households reporting that they had heard news about monetary policy relative to prior to the announcement, but this effect fades within a few days. Those hearing news about the announcement do not seem to have understood the announcement: they are no more likely to correctly identify the Fed’s new strategy than others, nor are their expectations different. When we provide randomly selected households with pertinent information about average inflation targeting, their expectations still do not change in a different way than when households are provided with information about traditional inflation targeting.
Keywords: inflation targeting; inflation expectations; surveys; communication; randomized controlled trial
JEL Codes: E3; E4; E5
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Federal Reserve's announcement of AIT (E52) | proportion of households that reported hearing about monetary policy news (E60) |
| proportion of households that reported hearing about monetary policy news (E60) | understanding of the Federal Reserve's new strategy (E52) |
| households informed about AIT (G52) | expectations regarding inflation, GDP growth, and personal income (E31) |
| Federal Reserve's announcement of AIT (E52) | household expectations (D19) |