The Effect of Inflation Uncertainty on Household Expectations and Spending

Last registered on September 12, 2024
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Pre-Trial

Trial Information

General Information

Title
The Effect of Inflation Uncertainty on Household Expectations and Spending
RCT ID
AEARCTR-0014275
Initial registration date
August 29, 2024

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
September 12, 2024, 5:04 PM EDT

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

Locations

Country
Canada
Region

Primary Investigator

Name
Luba Petersen
Affiliation
Simon Fraser University
Contact Primary Investigator

Other Primary Investigator(s)

PI Name
Olena Kostyshyna
PI Affiliation
Bank of Canada
Contact Investigator

Additional Trial Information

Status
Completed
Start date
2020-04-13
End date
2020-12-11
Keywords
Behavior, Other
Additional Keywords
JEL code(s)
E3, E4, E5
Secondary IDs
Prior work
This trial does not extend or rely on any prior RCTs.
Abstract
We study how exogenous variation in inflation uncertainty perceived by households affects their expectations and spending decisions. We use randomized information treatments that provide different types of information about the first and/or second moments of the Bank of Canada's inflation target, its outlook on inflation, and the inflation forecasts of professional forecasters to generate exogenous changes in the perceived inflation uncertainty of some households. The effects on their expectations and spending decisions relative to an untreated control group are measured immediately and in a follow-up survey.
External Link(s)

Registration Citation

Citation
Kostyshyna, Olena and Luba Petersen. 2024. "The Effect of Inflation Uncertainty on Household Expectations and Spending ." AEA RCT Registry. September 12. https://doi.org/10.1257/rct.14275-1.0
Sponsors & Partners

Sponsors

Experimental Details

Interventions

Intervention(s)
We provide information about the first and/or second moments of the Bank of Canada's inflation target, its outlook on inflation, and the inflation forecasts of professional forecasters to generate exogenous changes in the perceived inflation uncertainty of some households. The effects on their expectations and spending decisions relative to an untreated control group are measured immediately and in a follow-up survey.
Intervention Start Date
2020-04-13
Intervention End Date
2020-12-11

Primary Outcomes

Primary Outcomes (end points)
Inflation expectations, uncertainty about inflation, and household spending on nondurables and durable goods.
Primary Outcomes (explanation)

Secondary Outcomes

Secondary Outcomes (end points)
Secondary Outcomes (explanation)

Experimental Design

Experimental Design
elicit pre-treatment beliefs
assign groups into treatment and controls
treated groups are provided with publicly about information about inflation in Canada
elicit post-treatment beliefs
track respondents over time to see how/if they change their inflation expectations and consumer behavior
Experimental Design Details
Randomization Method
randomization done in office by a computer
Randomization Unit
survey respondent/individual
Was the treatment clustered?
No

Experiment Characteristics

Sample size: planned number of clusters
10000 respondents planned
Sample size: planned number of observations
10000 respondents
Sample size (or number of clusters) by treatment arms
1250 respondents in the control, 1250 respondents in each treatment
Minimum detectable effect size for main outcomes (accounting for sample design and clustering)
Supporting Documents and Materials
IRB

Institutional Review Boards (IRBs)

IRB Name
IRB Approval Date
IRB Approval Number
Analysis Plan

Post-Trial

Post Trial Information

Study Withdrawal

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Intervention

Is the intervention completed?
Yes
Intervention Completion Date
December 11, 2020, 12:00 +00:00
Data Collection Complete
Data Publication

Data Publication

Is public data available?
No

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Program Files

Program Files
No
Reports, Papers & Other Materials

Relevant Paper(s)

Abstract
This paper examines the value of direct communication to households about inflation and the uncertainty around inflation statistics. All types of information about inflation are effective at immediately managing inflation expectations, with information about outlooks being more effective and more relevant than that about recent inflation and Bank targets. We observe no downside to communicating about inflation with uncertainty on two measures: the level of expected inflation and uncertainty about it. On a third measure—probabilistic inflation expectations—we observe positive effects: they become more centered around the communicated ranges. However, communication with uncertainty weakens the link between expected inflation and spending plans, a key channel in the transmission of monetary policy. Communicating precise inflation outlooks can lengthen the effects of these communications on households.
Citation
Kostyshyna, O., & Petersen, L. (2023). Communicating inflation uncertainty and household expectations (No. 2023-63). Bank of Canada.
URL
https://www.bankofcanada.ca/2023/12/staff-working-paper-2023-63/

Reports & Other Materials