History-dependent monetary policy rules in the lab

Last registered on March 21, 2023


Trial Information

General Information

History-dependent monetary policy rules in the lab
Initial registration date
March 21, 2023

Initial registration date is when the trial was registered.

It corresponds to when the registration was submitted to the Registry to be reviewed for publication.

First published
March 21, 2023, 5:00 PM EDT

First published corresponds to when the trial was first made public on the Registry after being reviewed.



Primary Investigator

University of Ottawa and University of Amsterdam

Other Primary Investigator(s)

PI Affiliation
Simon Fraser University

Additional Trial Information

Start date
End date
Secondary IDs
Prior work
This trial does not extend or rely on any prior RCTs.
Price-level targeting (PLT) is optimal under the theory of rational expectations (RE), i.e. when expectations are in line with the monetary policy rule, but lacks empirical support. Given the hurdles to the implementation of macroeconomic field experiments, we utilize a laboratory forecasting group experiment -- where expectations come from human subjects -- to collect data on expectations, inflation and output dynamics under the traditional inflation targeting (IT) framework and PLT confronted with both deflationary and cost-push shocks. This sequence of shocks is designed to approximate the recent course of events. We add a third treatment where PLT is augmented with central bank communication about the time-dependent inflation rate that would be consistent with closing the price gap in each period. Under RE, this additional piece of information is redundant because agents are supposed to form model-consistent expectations.
External Link(s)

Registration Citation

Isabelle, Salle and Hung Truong. 2023. "History-dependent monetary policy rules in the lab." AEA RCT Registry. March 21. https://doi.org/10.1257/rct.11128-1.0
Sponsors & Partners


Experimental Details


We have three treatments: one inflation-targeting monetary policy rule, one price-level targeting monetary policy rule and one price-level targeting monetary policy rule augmented with communication about the time-varying inflation target that is consistent with closing the price gap. We have six groups of six subjects each.
Intervention Start Date
Intervention End Date

Primary Outcomes

Primary Outcomes (end points)
distance of inflation and output gaps and average output gap and inflation expectations to their targeted values; coordination between subjects' expectations, in the long and in the short runs
Primary Outcomes (explanation)
We compute the distances to the target as the absolute distances between the variables and their targeted values (exogenously set before the experiment), cumulated over each period of each session. The within-subject coordination is computed with the standard deviation in each period between the six expectations.

Secondary Outcomes

Secondary Outcomes (end points)
number of periods where the effective lower bound of the monetary policy rule is triggered
Secondary Outcomes (explanation)

Experimental Design

Experimental Design
The experiment belongs to the class of learning-to-forecast experiments: a standard three-equation New Keynesian model serves as the underlying data generating process. Its expectational variables are taken directly from the subjects (aggregated using the arithmetic mean) in each period and fed into the model which returns the actual values of these variables. This process is repeated for 75 periods.
The first 40 periods simulate a deflationary environment: after some small white noise shocks, a large deflationary shock is implemented in period 10 and lasts for three periods. The second submission of 35 periods features an inflationary environment with a similar cost-push shock.
The only difference between the three treatments is the monetary policy rule and the information set of the subjects. In all treatments, the subjects know the inflation target of the central bank. In the control treatment, the central bank implements a standard inflation targeting rule. We then have two treatments related to the alternative of price-level targeting: the first one only implements the monetary rule, without any further information; in the second one, we communicate to the subjects in each period the inflation rate that would be consistent with closing the price gap.
Experimental Design Details
Randomization Method
Subjects are randomly assigned to groups in one of the three treatments upon entering the lab.
Randomization Unit
experimental sessions
Was the treatment clustered?

Experiment Characteristics

Sample size: planned number of clusters
six sessions of six subjects for each of the three treatments
Sample size: planned number of observations
108 subjects
Sample size (or number of clusters) by treatment arms
36 subjects per treatment
Minimum detectable effect size for main outcomes (accounting for sample design and clustering)

Institutional Review Boards (IRBs)

IRB Name
SFU Office of Research Ethics
IRB Approval Date
IRB Approval Number


Post Trial Information

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Is the intervention completed?
Data Collection Complete
Data Publication

Data Publication

Is public data available?

Program Files

Program Files
Reports, Papers & Other Materials

Relevant Paper(s)

Reports & Other Materials