Arbeitspapier

Managing households' expectations with unconventional policies

to connected objects

Binding lower bounds on interest rates and large government deficits limit the scope of fiscal and monetary policies to stimulate households' spending through financial intermediaries and firms. Policymakers have thus been implementing unconventional policies that aim to increase households' spending directly through managing their expectations. We first show theoretically and empirically that higher in ation expectations increase households' consumption. We then design a difference-in-differences strategy to assess the effectiveness of unconventional fiscal policy and forward guidance, both of which aim to raise aggregate demand via managing expectations. Whereas unconventional fiscal policy increases households' expectations and spending, forward guidance announcements do not.

Language
Englisch

Bibliographic citation
Series: KIT Working Paper Series in Economics ; No. 148

Classification
Wirtschaft
Consumer Economics: Empirical Analysis
Expectations; Speculations
Micro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making‡
Macroeconomics: Consumption; Saving; Wealth
Price Level; Inflation; Deflation
Business Fluctuations; Cycles
Monetary Policy
Studies of Particular Policy Episodes
Subject
Expectations
Household Finance
Heterogeneous Beliefs
Fiscal Policy
Monetary Policy
Cognitive Abilities
Behavioral Macroeconomics
Macroeconomics with Micro Data

Event
Geistige Schöpfung
(who)
D'Acunto, Francesco
Hoang, Daniel
Weber, Michael
Event
Veröffentlichung
(who)
Karlsruher Institut für Technologie (KIT), Institut für Volkswirtschaftslehre (ECON)
(where)
Karlsruhe
(when)
2021

DOI
doi:10.5445/IR/1000130761
Handle
Last update
10.03.2025, 11:43 AM CET

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Object type

  • Arbeitspapier

Associated

  • D'Acunto, Francesco
  • Hoang, Daniel
  • Weber, Michael
  • Karlsruher Institut für Technologie (KIT), Institut für Volkswirtschaftslehre (ECON)

Time of origin

  • 2021

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