The Effects of Monetary Policy: Theory with Measured Expectations

Arbeitspapier

We study the effects of monetary policy on aggregate consumption combining a heterogeneous agent model with measured expectations under different policy counterfactuals. We express the consumption of non-hand-to-mouth households as a function of expectations only and elicit all expectations appearing in the consumption functions for alternative policy scenarios with tailored surveys. Feeding these individual-level expectations into the model illustrates that a modest forward guidance statement in March 2021 would have reduced aggregate consumption by 0.14 percent on impact and an interest rate hike of 40 basis points in March 2022 would have reduced aggregate consumption by 0.30 percent on impact.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 10216

Classification and Topics

• Classification: Wirtschaft ; Consumer Economics: Empirical Analysis ; Household Saving; Personal Finance ; Search; Learning; Information and Knowledge; Communication; Belief; Unawareness ; Expectations; Speculations ; Business Fluctuations; Cycles ; Portfolio Choice; Investment Decisions
• Subject: monetary policy ; expectation formation ; aggregate consumption

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Roth, Christopher ; Wiederholt, Mirko ; Wohlfart, Johannes
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2023

Further information

• Handle: http://hdl.handle.net/10419/271860
• Last update: 10.03.2025, 11:43 AM CET