| Description |
This paper examines how climate change narratives affect households' inflation expectations. The determinants of inflation expectations matter because expectations may influence behavior and policy. In particular, inflation expectations have implications for monetary and fiscal policy transmission. We conduct an information provision experiment among US households to determine how four different themed narratives (backward, forward, climate policy, and corporate greed) influence inflation expectations. The narratives have the same baseline information that climate change may impact grocery prices. We discover three main findings. First, our four climate change narratives increase one- and three-year inflation expectations. The climate policy and corporate greed narratives produce the largest effect. Second, the narratives have little effect on the confidence of a household's one- and three-year inflation forecast. Third, our experiment also documents how the provision of past inflation information affects a household's inflation expectation. This work situates in the growing economic literature studying inflation expectations using information provision experiments 1. |
