Would Households Understand Average Inflation Targeting?
Social Science Research Network(2022)
摘要
Yes, they would. We collect medium- and longer-term inflation expectations from 9,000
individuals in Germany. Unconditionally, the average probability mass is well-centered
around the ECB’s inflation aim of 2%. In a randomized control trial, we subject groups
of respondents with information about a hypothetical alternative ECB monetary policy
regime akin to the Federal Reserve’s flexible average inflation targeting (AIT). Inflation
expectations significantly increase for the treated individuals. When provided with additional
assumptions about current inflation, individuals update their expected inflation path
in line with the central banks’ intentions. Individuals with a high trust in the ECB’s ability
to achieve price stability adjust their inflation expectations particularly strongly. We assess
the economic significance of our findings by comparing two model economies under different
monetary policy strategies, calibrated to match the difference in medium-term inflation
expectations from our survey results. Inflation is six times less volatile and the frequency
of hitting the lower bound of interest rates substantially reduced under AIT.
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关键词
inflation,households
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