We study how different forms of communication influence inflation expectations in a randomized controlled trial using nearly 20,000 US individuals. We elicit individuals’ inflation expectations and then provide eight different forms of information regarding inflation. Reading the actual Federal Open Market Committee (FOMC) statement has about the same average effect on expectations as simply being told about the Federal Reserve’s inflation target. Reading news articles about the most recent FOMC meetings results in a forecast revision that is smaller by half. This exogenous variation in inflation expectations has subsequent effects on household spending reported in scanner and survey data.

Binding lower bounds on interest rates and large government deficits limit the scope of fiscal and monetary policies to stimulate households’ spending through financial intermediaries and firms. Policy makers have thus been implementing unconventional policies that aim to increase households’ spending directly through managing their expectations. We first show theoretically and empirically that higher inflation expectations increase households’ consumption. We then design a difference-in-differences strategy to assess the effectiveness of unconventional fiscal policy and forward guidance, both of which aim to raise aggregate demand via managing expectations. Whereas unconventional fiscal policy increases households’ expectations and spending, forward guidance announcements do not

Based on textual analysis and a comparison of cybersecurity risk disclosures of firms that were hacked to others that were not, we propose a novel firm-level measure of cybersecurity risk for all U.S.-listed firms. We then examine whether cybersecurity risk is priced in the cross-section of stock returns. Portfolios of firms with high exposure to cybersecurity risk outperform other firms, on average, by up to 8.3% per year. Yet, high-exposure firms perform poorly in periods of high cybersecurity risk. Reassuringly, the measure is higher in information-technology industries, correlates with characteristics linked to firms hit by cyberattacks, and predicts future cyberattacks.