Monetary Policy Communications and Their Effects on Household Inflation Expectations

64 Pages Posted: 30 Jan 2019

See all articles by Olivier Coibion

Olivier Coibion

University of Texas at Austin

Yuriy Gorodnichenko

University of California, Berkeley - Department of Economics; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

Michael Weber

University of Chicago - Finance

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Date Written: January 2019

Abstract

We study how different forms of communication influence the inflation expectations of individuals in a randomized controlled trial. We first solicit individuals’ inflation expectations in the Nielsen Homescan panel 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 a news article about the most recent FOMC meetings results in a forecast revision which is smaller by half. Our results have implications for how central banks should communicate to the broader public.

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Suggested Citation

Coibion, Olivier and Gorodnichenko, Yuriy and Weber, Michael, Monetary Policy Communications and Their Effects on Household Inflation Expectations (January 2019). NBER Working Paper No. w25482. Available at SSRN: https://ssrn.com/abstract=3324063

Olivier Coibion (Contact Author)

University of Texas at Austin ( email )

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Yuriy Gorodnichenko

University of California, Berkeley - Department of Economics ( email )

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Berkeley, CA 94720-3880
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Michael Weber

University of Chicago - Finance ( email )

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