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What moves households' expectations during a crisis? Evidence from a randomized information experiment

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  • Metiu, Norbert
  • Stockerl, Valentin

Abstract

Using a randomized information experiment embedded in a representative survey, we study households' economic expectations at onset of the COVID-19 crisis. Our experimental evidence indicates that households are not fully aware of what is happening in the economy shortly after the pandemic outbreak. Households that receive information on experts' views on the economy become more pessimistic and uncertain about the economic outlook and less willing to consume. Surprisingly, this also holds for households that receive information on major monetary and fiscal stimulus measures announced in response to the COVID-19 crisis, suggesting that policy announcements convey bad news about the economy that overshadow the good news about the measures announced. The effects are driven by households who are less exposed to and less informed about the economic consequences of the pandemic, underscoring that personal experiences receive a large weight in household expectation formation.

Suggested Citation

  • Metiu, Norbert & Stockerl, Valentin, 2024. "What moves households' expectations during a crisis? Evidence from a randomized information experiment," Discussion Papers 42/2024, Deutsche Bundesbank.
  • Handle: RePEc:zbw:bubdps:311843
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    More about this item

    Keywords

    household expectations; beliefs; information; policy announcements; randomized information experiment; COVID-19;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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