Consumers' macroeconomic expectations

authored by: Lena Dräger, Michael J. Lamla
Abstract: After the financial crisis of 2008, central banks around the world have increased their communication efforts to reach consumers, with the aim of both guiding and anchoring their inflation expectations. For the expectations channel of monetary policy to work as intended, central banks need a thorough understanding of the formation process of expectations by the general public and of the relationship between expectations and economic choices. This warrants reliable and detailed data on consumers' expectations of macroeconomic variables such as inflation or interest rates. We, thus, survey the available survey data and issues regarding the measurement of macroeconomic expectations. Furthermore, we discuss the research frontier on important aspects of the expectations channel: We evaluate the evidence on whether expectations are formed consistently with standard macroeconomic relationships, discuss the insights with respect to the anchoring of inflation expectations, explore the role of narratives and preferences and lastly, we survey the research on causal effects of central bank communication on expectations and economic choices.
Organisation(s): Institute of Monetary Economics
External Organisation(s): Munich Society for the Promotion of Economic Research - CESifo GmbH
University of Duisburg-Essen
ETH Zurich
Type: Article
Journal: Journal of Economic Surveys
Volume: 38
Pages: 427-451
No. of pages: 25
ISSN: 0950-0804
Publication date: 07.03.2024
Publication status: Published
Peer reviewed: Yes
ASJC Scopus subject areas: Economics and Econometrics
Electronic version(s): https://doi.org/10.1111/joes.12590 (Access: Open)
https://doi.org/10.15488/16126 (Access: Open)

BibTeX

@article{dd1426950ea948e5a758d2aca6c7bcac,
title = "Consumers' macroeconomic expectations",
abstract = "After the financial crisis of 2008, central banks around the world have increased their communication efforts to reach consumers, with the aim of both guiding and anchoring their inflation expectations. For the expectations channel of monetary policy to work as intended, central banks need a thorough understanding of the formation process of expectations by the general public and of the relationship between expectations and economic choices. This warrants reliable and detailed data on consumers' expectations of macroeconomic variables such as inflation or interest rates. We, thus, survey the available survey data and issues regarding the measurement of macroeconomic expectations. Furthermore, we discuss the research frontier on important aspects of the expectations channel: We evaluate the evidence on whether expectations are formed consistently with standard macroeconomic relationships, discuss the insights with respect to the anchoring of inflation expectations, explore the role of narratives and preferences and lastly, we survey the research on causal effects of central bank communication on expectations and economic choices.",
keywords = "central bank communication, consumers' macroeconomic expectations, survey data",
author = "Lena Dr{\"a}ger and Lamla, {Michael J.}",
note = "Funding Information: We thank the editor and four referees for substantially improving the paper with their comments and suggestions. Open access funding enabled and organized by Projekt DEAL.",
year = "2024",
month = mar,
day = "7",
doi = "10.1111/joes.12590",
language = "English",
volume = "38",
pages = "427--451",
journal = "Journal of Economic Surveys",
issn = "0950-0804",
publisher = "Wiley-Blackwell Publishing Ltd",
number = "2",
}