Olivier Coibion, Yuriy Gorodnichenko, Michael Weber, 19 March 2021

Households in advanced economies are quite uninformed about inflation. Does this mean that they ignore inflation their economic decisions? This column uses a randomised control trial, a large-scale survey, and spending data to show that the answer is ‘no’. When households change their inflation expectations, this causally alters their spending decisions. This suggests communication strategies that meaningfully impact household expectations can also be expected to affect their decisions. 

Olivier Coibion, Yuriy Gorodnichenko, Michael Weber, 31 October 2020

In a few days, many US citizens will wake up to an election outcome that they did not expect. Based on a large-scale representative survey of US individuals, 87% of Democrats expect Biden to win while 84% of Republicans expect Trump to win. This column argues that in addition to leading some to question the legitimacy of an outcome they did not foresee as remotely possible, this will also translate into widespread economic pessimism, as both sets of voters expect dire economic consequences if their preferred candidate loses. Election-driven changes in beliefs on the part of consumers will likely affect their spending decisions, putting further downward pressure on an already struggling economy.  

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