The causal effects of central bank communication on economic expectations and their underlying mechanisms are tested in controlled laboratory experiments. We find that central bank communication has a stabilizing effect on individual and aggregate outcomes, and the size of the effect varies with...

We use controlled laboratory experiments to test the causal effects of central bank communication on economic expectations and to distinguish the underlying mechanisms of those effects. In an experiment where subjects learn to forecast economic variables, we find that central bank communication...

The effectiveness of monetary policy depends, to a large extent, on market expectations of its future actions. In a standard New Keynesian business-cycle model with rational expectations, systematic monetary policy reduces the variance of inflation and the output gap by at least two-thirds....

Models with imperfect information that generate persistent monetary nonneutrality predominantly rely on assumptions leading to substantial heterogeneity of information across price-setters. This paper develops a quantitative general equilibrium model in which the degree of heterogeneity of...

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)...

We explore the effects of macroeconomic literacy training on expectation formation in an experimental economy where participants' aggregated expectations endogenously influence macroeconomic variables. We systematically vary the information participants receive about the economy's...