Arbeitspapier

The Effects of Monetary Policy: Theory with Measured Expectations

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.

Language
Englisch

Bibliographic citation
Series: CESifo Working Paper ; No. 10216

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

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

Handle
Last update
10.03.2025, 11:43 AM CET

Data provider

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Object type

  • Arbeitspapier

Associated

  • Roth, Christopher
  • Wiederholt, Mirko
  • Wohlfart, Johannes
  • Center for Economic Studies and ifo Institute (CESifo)

Time of origin

  • 2023

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