Seminar in Macroeconomics - Anchoring Household’s Inflation Expectations when Inflation is High

Time
Monday, 13. November 2023
12:00 - 13:15

Location
F428

Organizer

Speaker:
Giang Nghiem (Leibniz University Hannover)

Anchoring Household’s Inflation Expectations when Inflation is High

(jointly with Ami Dalloul and Lena Dräger)

Abstract: This paper explores effective communication strategies for anchoring household inflation expectations in a high inflation environment. We conducted a randomized control trial (RCT) with a representative sample of 4,000 German consumers in early 2023, providing them with varying qualitative and quantitative information provided by the ECB regarding the ECB’s inflation target and projected inflation. Our results reveal significant de-anchoring of inflation expectations in Germany during this period. Communication strategies, including quantitative inflation projections or information on the target alongside a qualitative statement emphasizing the ECB’s commitment to the target, improve the anchoring. This effect is particularly pronounced among respondents with high financial literacy and trust in the central bank. We also explore the mechanisms behind these effects through households’ information assessment.

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