Monetary policy and macroeconomic expectations

We examine how monetary policy influences macroeconomic expectations of experts. We run two large-scale international surveys among economic experts and exploit the effects of announcements of key interest rates on inflation rates and economic growth expectations.

2022-12-14

2022-12-15

expectations on inflation rates and GDP growth

We examine how monetary policy influences macroeconomic expectations of experts. We run two large-scale international surveys among economic experts and exploit the effects of announcements of key interest rates on inflation rates and economic growth expectations.

We examine how monetary policy influences macroeconomic expectations of ex-perts. We run two large-scale international surveys among economic experts and exploit the effects of announcements of key interest rates for the United States and Canada and the Eurozone on inflation rates and economic growth expectations. Surveying experts just before and after the announcements allows for causal inference. Our survey elicits expectations about inflation rates and GDP growth for the years 2023 (short-term expectations), 2024 (mid-term expectations), and 2026 (longer-term expectations). We conduct this survey both for an announcement of the Federal Re-serve as well as for the ECB. We randomly split participants in two groups. The first group will be contacted in the first wave between 12 December 2022 and 14 Decem-ber 2022, two days before the press conference of the Federal Open Market Committee (FOMC). The second wave contacts experts between 14 December 2022 and 16 December 2022, two days after the press conference of the FOMC. Our second exper-iment surveys around 300 experts working in the Eurozone. The first wave addressing the Eurozone experts will be implemented between 13 December 2022 and 15 De-cember 2022, two days before the press conference of the European Central Bank (ECB) council. The second wave conducted between 15 December 2022 and 17 De-cember 2022, two days after the press conference of the ECB council. The treatment is the central bank announcements i.e., the decisions of the FOMC and the ECB coun-cils. To account for confounding events, we would like to estimate within-day chang-es by considering only those respondents who participated at the day of the announcement.

Our first hypothesis for the full sample of experts is that the announcement of an (or higher-than-expected) increase in key interest rates decreases the expected inflation rate and the expected growth rate.

Our sample of experts consists of economists working in all fields of economics. Hence, we suspect treatment heterogeneity across fields, hypothesizing that experts who work in the field of macroeconomics and monetary economics have distinct expectations about the monetary policy decisions to be announced on the press con-ferences of the FOMC on the 14 December 2022 and the ECB council on 15 December. The expectations are portrayed, for example, by Bloomberg. The FED and the ECB are expected to further increase interest rates. Our second hypothesis is that treated ex-perts expect lower inflation rates than non-treated experts, when the interest rates increases are higher than expected (and vice versa). Relatedly, our third hypothesis is that the treatment effects are lower for experts working in the field of macroeconom-ics and monetary economics. For experts outside of these fields, a potential increase in interest rates provides more fundamentally new information compared to experts in macroeconomics and monetary economics.

Our survey also includes open-ended questions that elicit the narratives and subjec-tive macroeconomic models of respondents behind the numbers reported. We ask experts to elaborate on channels of the treatment effects. We use answers to these questions to examine the channels underlying a potential treatment effect identified in our design. We expect that treated experts are more likely to report that central banks are important for current and future inflation. We also explore whether treat-ment effects are conditional on the perceived drivers of inflation. Our fourth hypoth-esis is that the negative treatment effects of monetary policy on expected inflation rates are larger for respondents that perceive demand-side effects to be responsible for current inflation rates than for respondents who perceive supply-side effects to be dominant.

randomization done in office by a computer

experts

No

130 experts in the United States and Canada (expected number of respondents)
300 experts in the Eurozone (expected number of respondents)

Sample size (or number of clusters) by treatment arms
65 control experts in the United States and Canada
65 treated experts in the United States and Canada
150 control experts in the Eurozone
150 treated experts in the Eurozone

130 experts in the United States and Canada (expected number of respondents) 300 experts in the Eurozone (expected number of respondents) Sample size (or number of clusters) by treatment arms 65 control experts in the United States and Canada 65 treated experts in the United States and Canada 150 control experts in the Eurozone 150 treated experts in the Eurozone

130 experts in the United States and Canada (expected number of respondents)
300 experts in the Eurozone (expected number of respondents)

Sample size (or number of clusters) by treatment arms
65 control experts in the United States and Canada
65 treated experts in the United States and Canada
150 control experts in the Eurozone
150 treated experts in the Eurozone