At the zero lower bound (ZLB), expectations about the future path of monetary or fiscal policy are crucial. We model … expectations formation under level-k thinking, a form of bounded rationality introduced by García-Schmidt and Woodford (2019) and … from rational expectations models, such as the forward guidance and the reversal puzzle, or implausible large fiscal …

substantially. We document this fact by comparing an easy-to-grasp expectations-based policy, unconventional fiscal policy, with a … consumption via managing inflation expectations based on the Euler equation. Unconventional fiscal policy uses trivial … announcements of future consumer-price increases to boost inflation expectations and consumption expenditure on impact. Instead …

unconventional policies that aim to increase households' spending directly through managing their expectations. We first show … theoretically and empirically that higher in ation expectations increase households' consumption. We then design a difference … demand via managing expectations. Whereas unconventional fiscal policy increases households' expectations and spending …