What information is important for households’ inflation expectations: a randomized controlled trial
Grishchenko V., Lymar M., Sinyakov A.
The paper studies the influence of different economic information on inflation expectations of Russian households. The study is based on a randomized controlled trial. Participants were randomly divided into groups and each group was provided with different information: the current inflation rate according to Rosstat, the inflation target of the Bank of Russia, the success of the Bank of Russia in achieving the inflation target in previous years, inflation expectations according to the survey of LLC “InFOM” and the growth rate of broad money.
The study shows that participants react most strongly to information about a significant increase in the broad money. Having received such information, people begin to expect higher price growth in the future. This indicates that people associate an increase in the volume of money in the economy with a possible increase in inflation.
However, unlike many other countries, Russian households hardly react to information about past inflation, the central bank's official inflation target and reports about the central bank's previous success in keeping inflation at a given level. This may indicate low public confidence in official statistics or insufficient awareness of the regulator's activities.
The results are important for the central bank, as they show the need not only for quality communication to the people, but also for specific actions that could convince households in its ability to control inflation. The authors recommend that the Bank of Russia should emphasise transparent and clear solutions by actively involving citizens in understanding their actions, instead of simply communicating inflation targets and past successes.
Thus, the results of the experiment may help the Bank of Russia to better manage inflation expectations of the population and improve communication policy, which ultimately can contribute to macroeconomic stability.