Fiscal Policy and Households' Inflation Expectations: Evidence from a Randomized Control Trial

Rising government debt levels around the world are raising specter that authorities might seek to inflate away debt. In theoretical settings where fiscal policy “dominates” monetary policy, higher without offsetting changes in primary surpluses should lead households anticipate this inflation. Are household inflation expectations sensitive considerations practice? We field a large randomized control trial on U.S. address question by providing randomly chosen subsets of with information treatments about outlook and then observing how they revise their future as well taxes spending. find current or deficit has little impact but news leads them inflation, both short run long run. News rising also induces spending rate interest for