Managing Households' Expectations with Unconventional Policies

74 Pages Posted: 10 Aug 2019 Last revised: 5 Jun 2020

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

Multiple version iconThere are 3 versions of this paper

Date Written: June 2020


With a binding effective lower bound on interest rates and large government deficits, conventional policies are unviable and policymakers resort to unconventional policies, which target households' expectations directly. Using unique micro data and a difference-in-differences strategy, we assess the effectiveness of unconventional fiscal policy and forward guidance, both of which aim to stimulate consumption via raising households' inflation expectations. All households' inflation expectations and spending plans react to unconventional fiscal policy. Instead, households, contrary to experts, do not react to forward guidance. We argue that policies aiming to a_ect households directly are ineffective if (non-expert) households do not understand them.

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 (June 2020). 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

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