Are survey expectations theory-consistent? The role of central bank communication and news
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Are survey expectations theory-consistent? The role of central bank communication and news. / Dräger, Lena; Lamla, Michael J; Pfajfar, Damjan.
In: European Economic Review, Vol. 85, 01.06.2016, p. 84-111.Research output: Journal contributions › Journal articles › Research › peer-review
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TY - JOUR
T1 - Are survey expectations theory-consistent?
T2 - The role of central bank communication and news
AU - Dräger, Lena
AU - Lamla, Michael J
AU - Pfajfar, Damjan
PY - 2016/6/1
Y1 - 2016/6/1
N2 - In this paper we analyze whether central bank communication can facilitate the understanding of key economic concepts. Using survey data for consumers and professionals, we calculate how many of them have expectations consistent with the Fisher Equation, the Taylor rule and the Phillips curve and test, by accounting for three different communication channels, whether central banks can influence those. A substantial share of participants has expectations consistent with the Fisher equation, followed by the Taylor rule and the Phillips curve. We show that having theory-consistent expectations is beneficial, as it improves the forecast accuracy. Furthermore, consistency is time varying. Exploring this time variation, we provide evidence that central bank communication as well as news on monetary policy can facilitate the understanding of those concepts and thereby improve the efficacy of monetary policy.
AB - In this paper we analyze whether central bank communication can facilitate the understanding of key economic concepts. Using survey data for consumers and professionals, we calculate how many of them have expectations consistent with the Fisher Equation, the Taylor rule and the Phillips curve and test, by accounting for three different communication channels, whether central banks can influence those. A substantial share of participants has expectations consistent with the Fisher equation, followed by the Taylor rule and the Phillips curve. We show that having theory-consistent expectations is beneficial, as it improves the forecast accuracy. Furthermore, consistency is time varying. Exploring this time variation, we provide evidence that central bank communication as well as news on monetary policy can facilitate the understanding of those concepts and thereby improve the efficacy of monetary policy.
KW - Economics
KW - Macroeconomic expectations
KW - Central bank communication
KW - Monetary news
KW - Survey microdata
KW - Consumer forecast accuracy
UR - http://www.scopus.com/inward/record.url?scp=84959924160&partnerID=8YFLogxK
U2 - 10.1016/j.euroecorev.2016.01.010
DO - 10.1016/j.euroecorev.2016.01.010
M3 - Journal articles
VL - 85
SP - 84
EP - 111
JO - European Economic Review
JF - European Economic Review
SN - 0014-2921
ER -