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14:00 | Room 402 | Macro Research Seminar
Ludwig-Maximilians-Universität München, Germany
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Authors: Christopher Roth, Mirko Wiederholt, Johannes Wohlfart
Abstract: We study the effects of monetary policy on aggregate consumption combining a heterogeneous agent model with measured expectations under different policy counterfactuals. We express the consumption of non-hand-to-mouth households as a function of expectations and elicit the expectations appearing in the consumption functions for alternative policy scenarios with tailored surveys. Feeding these individual-level expectations into the model illustrates that a modest forward guidance statement in March 2021 would have reduced aggregate consumption by 0.14 percent on impact and an interest rate hike of 40 basis points in March 2022 would have reduced aggregate consumption by 0.30 percent on impact.
JEL Classification: D12, D14, D83, D84, E32, G11
Keywords: Monetary Policy, Expectation Formation, Aggregate Consumption.
Full Text: The Effects of Monetary Policy: Theory with Measured Expectations
