Managing Households' Expectations with Unconventional Policies / Francesco D’Acunto, Daniel Hoang, Michael Weber.

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D’Acunto, Francesco

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w27399.Publication details: Cambridge, Mass. National Bureau of Economic Research 2020.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: 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 affect households directly are ineffective if (non-expert) households do not understand them.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w27399 (Browse shelf(Opens below))	Not For Loan

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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 affect households directly are ineffective if (non-expert) households do not understand them.