Macroeconomic expectations, central bank communication, and background uncertainty: A COVID-19 laboratory experiment.

ABSTRACT: This paper explores the robustness of laboratory expectation formation and public signal credibility to external uncertainty shocks and online experimentation. We exploit the recent pandemic as a source of exogenous background uncertainty in a New Keynesian learning-to-forecast experiment (LtFE) where participants receive projections of varying precision about future inflation. We compare results from identical LtFE completed immediately before the onset of the pandemic, soon after (online), and well after (online and in-person). Baseline LtFEs with no communication are robust to both factors. However, both background uncertainty and online experimentation impact how subjects use public signals. The pandemic led to a decreased appetite for and tolerance of overly precise communication whil

SUBMITTER: Petersen L 

PROVIDER: S-EPMC9233881 | biostudies-literature | 2022 Oct

REPOSITORIES: biostudies-literature