Working Paper: NBER ID: w27836
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. Even one year after the announcement, U.S. households remain mostly unaware of the change in strategy or its implications.
Keywords: No keywords provided
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) | public awareness of the Federal Reserve's new strategy (E52) |
| Federal Reserve's announcement of AIT (E52) | expectations regarding inflation (E31) |
| Federal Reserve's announcement of AIT (E52) | expectations regarding GDP growth (E20) |
| Federal Reserve's announcement of AIT (E52) | expectations regarding personal income growth (D31) |
| direct information about AIT (Y20) | expectations for future inflation (D84) |
| direct information about AIT (Y20) | expectations for GDP growth (E20) |
| direct information about AIT (Y20) | expectations for personal income growth (D31) |