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Managing households‘ expectations with unconventional policies

D‘Acunto, Francesco; Hoang, Daniel; Weber, Michael

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DOI: 10.5445/IR/1000130761
Veröffentlicht am 26.03.2021
Cover der Publikation
Zugehörige Institution(en) am KIT Institut für Volkswirtschaftslehre (ECON)
Publikationstyp Forschungsbericht/Preprint
Publikationsjahr 2021
Sprache Englisch
Identifikator ISSN: 2190-9806
KITopen-ID: 1000130761
Verlag Karlsruher Institut für Technologie (KIT)
Umfang 89 S.
Serie Working paper series in economics ; 148
Bemerkung zur Veröffentlichung Binding lower bounds on interest rates and large government deficits limit the scope of fiscaland monetary policies to stimulate households’ spending through financial intermediariesand firms. Policymakers have thus been implementing unconventional policies that aimto increase households’ spending directly through managing their expectations. We firstshow theoretically and empirically that higher inflation expectations increase households’consumption. We then design a difference-in-differences strategy to assess the effectivenessof unconventional fiscal policy and forward guidance, both of which aim to raise aggregatedemand via managing expectations.Whereas unconventional fiscal policy increaseshouseholds’ expectations and spending, forward guidance announcements do not.
Schlagwörter Expectations, Household Finance, Heterogeneous Beliefs, FiscalPolicy, Monetary Policy, Cognitive Abilities, Behavioral Macroeconomics, Macroeconomics with Micro Data
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