Monetary policy shocks from the consumer perspective
E Claus, VH Nguyen
Journal of Monetary Economics | Elsevier | Published : 2020
Applying a latent factor model to survey expectations data on economic conditions, unemployment, family finances, and readiness to spend reveals that, following a monetary policy shock, consumer expectations adjust in the direction predicted by standard models. Further, expectations respond asymmetrically to policy tightenings or easings, are sluggish, and are consistent with an income channel of monetary policy. Inflation expectations are at first anchored, but significantly adjust in the long run, in a way that is consistent with a Delphic effect of monetary policy. Expectations are heterogeneous according to gender, income, and housing status in systematic ways.
Awarded by University of Melbourne
Nguyen acknowledges financial support from the University of Melbourne, 2015FRG