Managing Households' Expectations with Unconventional Policies

88 Pages Posted: 10 Aug 2019 Last revised: 27 Feb 2021

See all articles by Francesco D'Acunto

Francesco D'Acunto

Boston College

Daniel Hoang

Karlsruhe Institute of Technology (KIT)

Michael Weber

University of Chicago - Finance; National Bureau of Economic Research (NBER)

Multiple version iconThere are 3 versions of this paper

Date Written: January 2021


Binding lower bounds on interest rates and large government deficits make fiscal and monetary policies that stimulate households' spending through financial intermediaries and firms unviable. Policymakers have thus been implementing unconventional policies that aim to manage households' expectations and spending directly. We first show theoretically and empirically that higher inflation expectations increase households' consumption. We then design a difference-in-differences strategy to assess the effectiveness of unconventional fiscal policy and forward guidance, both of which aim to raise aggregate demand via managing households' expectations. Whereas unconventional fiscal policy effectively increases households' expectations and spending, forward guidance announcements do not.

Keywords: Expectations, Household Finance, Heterogeneous Beliefs, Fiscal Policy, Monetary Policy, Cognitive Abilities, Behavioral Macroeconomics, Macroeconomics with Micro Data

JEL Classification: D12, D84, D91, E21, E31, E32, E52, E65

Suggested Citation

D'Acunto, Francesco and Hoang, Daniel and Weber, Michael, Managing Households' Expectations with Unconventional Policies (January 2021). Chicago Booth Research Paper No. 19-16 (2019), Fama-Miller Working Paper (2019), Available at SSRN: or

Francesco D'Acunto

Boston College ( email )

140 Commonwealth Avenue
Chestnut Hill, MA 02467
United States

Daniel Hoang

Karlsruhe Institute of Technology (KIT) ( email )


Michael Weber (Contact Author)

University of Chicago - Finance ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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