EBOOK
About
What people believe about the economy-and why it matters
How do expectations about the future influence economic behavior? For decades, economists have known that beliefs play a central role-from how much households spend, to how firms set prices, to how central banks design policy. But figuring out exactly how expectations affect decisions has been one of the field's most persistent empirical challenges.
In this book, Olivier Coibion and Yuriy Gorodnichenko present a fresh empirical approach: using randomized controlled trials (RCTs) to study the causal impact of expectations. Drawing on more than a decade of their research, they show how targeted information treatments can generate experimental variation in beliefs-making it possible to measure how those beliefs influence real-world decisions. Along the way, they reassess the limits of the traditional rational expectations framework and offer a richer, evidence-based picture of how people form and act on their views about the economy.
Blending the credibility of field experiments with the big-picture questions of macroeconomics, the authors provide a clear, practical guide to this new methodology-from survey design to implementation to measuring how beliefs pass through into behavior. While much of the book focuses on inflation expectations, later chapters explore how this approach sheds light on the role of uncertainty in firm and household decision making, the influence of expectations on financial behavior, and how peer effects shape household spending. For economists and social scientists alike, this book offers a new lens on how beliefs work-and why they matter. Olivier Coibion is the Malcolm Forsman Centennial Professor in the Department of Economics at the University of Texas at Austin. Yuriy Gorodnichenko is the Quantedge Presidential Professor in the Department of Economics at the University of California, Berkeley. "An extraordinary book-clear, engaging, and full of practical wisdom. It covers everything from designing surveys to running experiments, translating evidence into policy, and connecting to the frontier of research. A must-read guide for anyone working at the intersection of data and policy. It truly exceeded my expectations."-Nicholas Bloom, Stanford University
"Expectations are the feature that distinguishes our object of inquiry in economics from particles, molecules, and genes. We need to measure, study, and theorize them. Olivier Coibion and Yuriy Gorodnichenko's book is a comprehensive and magisterial treatment of this long-neglected problem that will serve as a textbook and how-to guide for advanced undergraduate and graduate-economics level classes."-Rüdiger Bachmann, University of Michigan
"Coibion and Gorodnichenko have revolutionized empirical research on macroeconomic expectations, informing both theory and policy. This book distills their contributions, synthesizes other important research in the area, and maps the road ahead-an essential reference for graduate students, researchers, and policymakers."-George-Marios Angeletos, Northwestern University "[Expectations Matter] should . . . be a reference volume on the shelf of every economist interested in bringing evidence to bear upon decision making."---Bridget Rosewell, The Society of Professional Economists
How do expectations about the future influence economic behavior? For decades, economists have known that beliefs play a central role-from how much households spend, to how firms set prices, to how central banks design policy. But figuring out exactly how expectations affect decisions has been one of the field's most persistent empirical challenges.
In this book, Olivier Coibion and Yuriy Gorodnichenko present a fresh empirical approach: using randomized controlled trials (RCTs) to study the causal impact of expectations. Drawing on more than a decade of their research, they show how targeted information treatments can generate experimental variation in beliefs-making it possible to measure how those beliefs influence real-world decisions. Along the way, they reassess the limits of the traditional rational expectations framework and offer a richer, evidence-based picture of how people form and act on their views about the economy.
Blending the credibility of field experiments with the big-picture questions of macroeconomics, the authors provide a clear, practical guide to this new methodology-from survey design to implementation to measuring how beliefs pass through into behavior. While much of the book focuses on inflation expectations, later chapters explore how this approach sheds light on the role of uncertainty in firm and household decision making, the influence of expectations on financial behavior, and how peer effects shape household spending. For economists and social scientists alike, this book offers a new lens on how beliefs work-and why they matter. Olivier Coibion is the Malcolm Forsman Centennial Professor in the Department of Economics at the University of Texas at Austin. Yuriy Gorodnichenko is the Quantedge Presidential Professor in the Department of Economics at the University of California, Berkeley. "An extraordinary book-clear, engaging, and full of practical wisdom. It covers everything from designing surveys to running experiments, translating evidence into policy, and connecting to the frontier of research. A must-read guide for anyone working at the intersection of data and policy. It truly exceeded my expectations."-Nicholas Bloom, Stanford University
"Expectations are the feature that distinguishes our object of inquiry in economics from particles, molecules, and genes. We need to measure, study, and theorize them. Olivier Coibion and Yuriy Gorodnichenko's book is a comprehensive and magisterial treatment of this long-neglected problem that will serve as a textbook and how-to guide for advanced undergraduate and graduate-economics level classes."-Rüdiger Bachmann, University of Michigan
"Coibion and Gorodnichenko have revolutionized empirical research on macroeconomic expectations, informing both theory and policy. This book distills their contributions, synthesizes other important research in the area, and maps the road ahead-an essential reference for graduate students, researchers, and policymakers."-George-Marios Angeletos, Northwestern University "[Expectations Matter] should . . . be a reference volume on the shelf of every economist interested in bringing evidence to bear upon decision making."---Bridget Rosewell, The Society of Professional Economists