Effective Policy Communication: Targets versus Instruments

43 Pages Posted: 19 Oct 2020

See all articles by Francesco D'Acunto

Francesco D'Acunto

Boston College

Daniel Hoang

Karlsruhe Institute of Technology (KIT)

Maritta Paloviita

Bank of Finland - Research

Michael Weber

University of Chicago - Finance

Multiple version iconThere are 2 versions of this paper

Date Written: October 15, 2020


Communication targeting households and firms has become a stand-alone policy tool of many central banks. But which forms of communication, if any, can reach ordinary people and manage their economic expectations effectively? In a large-scale randomized control trial, we show that communication manages expectations when it focuses on policy targets and objectives rather than on the instruments designed to reach such objectives. It is especially the least sophisticated demographic groups, which central banks typically struggle to reach, who react more to target-based communication. When exposed to target-based communication, these groups are also more likely to believe that policies will benefit households and the economy. Target-based communication enhances policy effectiveness and contributes to strengthen the public’s trust in central banks, which is crucial to guarantee the credibility of their policies.

Keywords: Behavioral Macroeconomics, Heterogeneous Beliefs, Limited Cognition, Expectations Formation, Household Finance

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

Suggested Citation

D'Acunto, Francesco and Hoang, Daniel and Paloviita, Maritta and Weber, Michael, Effective Policy Communication: Targets versus Instruments (October 15, 2020). University of Chicago, Becker Friedman Institute for Economics Working Paper No. 2020-148, Available at SSRN: https://ssrn.com/abstract=3712658 or http://dx.doi.org/10.2139/ssrn.3712658

Francesco D'Acunto

Boston College ( email )

140 Commonwealth Avenue
Chestnut Hill, MA 02467
United States

Daniel Hoang

Karlsruhe Institute of Technology (KIT) ( email )


Maritta Paloviita

Bank of Finland - Research ( email )

P.O. Box 160
FIN-00101 Helsinki
+358 9 1831 (Phone)
+358 9 1832560 (Fax)

Michael Weber (Contact Author)

University of Chicago - Finance ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Abstract Views
PlumX Metrics