Using a novel experimental setup, we study the direction of causality between consumers’ inflation expectations and their income growth expectations. In a large, nationally representative survey of US consumers, we find that the rate of passthrough from expected inflation to expected income...

We assess whether central banks may use inflation expectations as a policy tool for stabilization purposes. We review recent work on how expectations of agents are formed and how they affect their economic decisions. Empirical evidence suggests that inflation expectations of households and firms...

Flexible exchange rates can facilitate price adjustments that buffer macroeconomic shocks. We test this hypothesis using adjustments to the gold standard during the Great Depression. Using prices at the goods level, we estimate exchange rate pass-through and find gains in competitiveness after a...

This paper proposes a new taxonomy of Sudden Stops comprised of seven categories with definitions depending on the behavior of gross and net capital flows. The incidence of different types of Sudden Stops is tracked over time and the type of Sudden Stop related to economic performance. Sudden...

We study the reaction of voters to shifts in local economic conditions. Using the departure from the gold standard of US trading partners in 1931 and the US in 1933, we exploit heterogeneity in export destinations, creating local differences in expenditure-switching in US counties by isolating...

Based on indirect utility theory, we introduce a novel methodology of measuring inflation expectations indirectly. This methodology starts at the individual level, asking consumers about the change in income required to buy the same amounts of goods and services one year ahead. Analytically, our...

Using a large, nationally representative survey of US consumers, we estimate a causal 20 percent pass-through from inflation expectations to income growth expectations for the average consumer, with considerable heterogeneity in pass-through associated with sociodemographic factors. The results...