Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/309115 
Year of Publication: 
2024
Series/Report no.: 
IDB Working Paper Series No. IDB-WP-1641
Publisher: 
Inter-American Development Bank (IDB), Washington, DC
Abstract: 
We study how monetary policy communications associated with increasing the federal funds rate causally affect consumers inflation expectations in real time. In a large-scale, multi-wave randomized controlled trial (RCT), we find weak evidence that communicating these policy changes lowers consumers medium-term inflation expectations on average. However, information differs systematically across demographic groups, in terms of ex ante informedness about monetary policy and ex post compliance with the information treatment. Monetary policy communications have a much stronger effect on the subset of consumers who had not previously heard news about monetary policy and who take sufficient time to read the treatment. Our findings show that, in an inflationary environment, these consumers expect that raising interest rates will lower inflation. More generally, our results emphasize the importance of measuring both respondents information sets and their compliance with treatment when using RCTs in empirical macroeconomics to better understand the real-world implications of monetary policy communications.
Subjects: 
Expectations formation
Policy communication
Monetary policy
Inflation
Surveys
JEL: 
E31
E52
E58
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Working Paper

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