Thursday , October 29 2020
Home / Amol Agrawal: Mostly Economics / Do people understand Fed’s new policy of Average Inflation Targeting?

Do people understand Fed’s new policy of Average Inflation Targeting?

Summary:
Olivier Coibion, Yuriy Gorodnichenko, Edward S. Knotek II, Raphael Schoenle analyse the early impact of Fed’s new policy of  Average Inflation Targeting. As expected. not many people understand the difference between AIT and IT: Using a daily survey of U.S. households, we study how the Federal Reserve’s announcement of its new strategy of average inflation targeting affected households’ expectations. Starting with the day of the announcement, there is a very small uptick in the minority of households reporting that they had heard news about monetary policy relative to prior to the announcement, but this effect fades within a few days. Those hearing news about the announcement do not seem to have understood the announcement: they are no more likely to correctly identify the Fed’s new

Topics:
Amol Agrawal considers the following as important: , , , ,

This could be interesting, too:

Amol Agrawal writes Institutional Cryptoeconomics: Everything You Need to Know about This Blockchain Concept

Amol Agrawal writes The importance of good framework conditions for the Swiss financial centre

Amol Agrawal writes Milton Friedman and Exchange Rates in Developing Countries

Amol Agrawal writes Book Review: Bringing Economic History Back into Curriculums

Olivier Coibion, Yuriy Gorodnichenko, Edward S. Knotek II, Raphael Schoenle analyse the early impact of Fed’s new policy of  Average Inflation Targeting. As expected. not many people understand the difference between AIT and IT:

Using a daily survey of U.S. households, we study how the Federal Reserve’s announcement of its new strategy of average inflation targeting affected households’ expectations. Starting with the day of the announcement, there is a very small uptick in the minority of households reporting that they had heard news about monetary policy relative to prior to the announcement, but this effect fades within a few days.

Those hearing news about the announcement do not seem to have understood the announcement: they are no more likely to correctly identify the Fed’s new strategy than others, nor are their expectations different.

When we provide randomly selected households with pertinent information about average inflation targeting, their expectations still do not change in a different way than when households are provided with information about traditional inflation targeting.

Fed surely has a big challenge to explain the difference to the general public…

Amol Agrawal
I am currently pursuing my PhD in economics. I have work-ex of nearly 10 years with most of those years spent figuring economic research in Mumbai’s financial sector.

Leave a Reply

Your email address will not be published. Required fields are marked *