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How Do People Interpret Macroeconomic Shocks? Evidence from U.S. Survey Data

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  • MARTIN GEIGER
  • JOHANN SCHARLER

Abstract

We study the revision of survey expectations in response to macroeconomic shocks, which we identify in vector autoregressive models with sign restrictions. We find that survey respondents distinguish between movements along the Phillips curve and shifts of the Phillips curve, depending on the type of shock that hits the economy. In addition, interest rate expectations are revised broadly in line with a Taylor rule. Consistent with models of rational inattention, macroeconomic shocks account for a small share of the forecast error variance of survey measures elicited from consumers, while they are more relevant for the expectations of professional forecasters.

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  • Martin Geiger & Johann Scharler, 2021. "How Do People Interpret Macroeconomic Shocks? Evidence from U.S. Survey Data," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 53(4), pages 813-843, June.
    • Handle: RePEc:wly:jmoncb:v:53:y:2021:i:4:p:813-843
    DOI: 10.1111/jmcb.12747
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    4. Geiger, Martin & Gründler, Daniel & Scharler, Johann, 2023. "Monetary policy shocks and consumer expectations in the euro area," Journal of International Economics, Elsevier, vol. 140(C).
    5. Gründler, Daniel, 2023. "Expectations, structural breaks and the recent surge in inflation," Economics Letters, Elsevier, vol. 233(C).

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    More about this item

    JEL classification:

    • E00 - Macroeconomics and Monetary Economics - - General - - - General
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations

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