Unemployment expectation shocks impact economy more under hawkish inflation conditions
The study looked at how people's expectations about unemployment affect the economy when the Federal Reserve changes its policies based on economic conditions. By analyzing different policy structures, the researchers found that expectation shocks have a bigger impact on the economy when the Federal Reserve is more concerned about inflation. This means that people's beliefs about unemployment can have a stronger effect on current and future economic activities when inflation is a bigger concern for the Federal Reserve.