The Role of Information and Experience for Households' Inflation Expectations

33 Pages Posted: 30 Mar 2021

See all articles by Christian Conrad

Christian Conrad

Heidelberg University - Alfred Weber Institute for Economics; ETH Zürich - KOF Swiss Economic Institute

Zeno Enders

University of Heidelberg

Alexander Glas

Friedrich-Alexander University; ZEW – Leibniz Centre for European Economic Research

Multiple version iconThere are 2 versions of this paper

Date Written: 2021

Abstract

Based on a new survey of German households, we investigate the role that information channels and lifetime experience play in households' inflation expectations. We show that the types of information channels that households use to inform themselves about monetary policy are closely related to their socioeconomic characteristics. These information channels, in turn, have a major influence on the level of perceived past and expected future inflation, as well as on the uncertainty thereof. The expected future change in inflation and the unemployment rate, however, is strongly influenced by individual experience of these variables. Similarly, the expected response of inflation to a change in the interest rate is also shaped by experience. We propose the interpretation that households obtain inflation numbers from the media, but their 'economic model' is shaped by experience.

JEL Classification: E31, D84, E71

Suggested Citation

Conrad, Christian and Enders, Zeno and Glas, Alexander, The Role of Information and Experience for Households' Inflation Expectations (2021). Deutsche Bundesbank Discussion Paper No. 07/2021, Available at SSRN: https://ssrn.com/abstract=3813660 or http://dx.doi.org/10.2139/ssrn.3813660

Christian Conrad (Contact Author)

Heidelberg University - Alfred Weber Institute for Economics ( email )

Grabengasse 14
Heidelberg, D-69117
Germany
+49 (06)221 543173 (Phone)

HOME PAGE: http://www.uni-heidelberg.de/conrad

ETH Zürich - KOF Swiss Economic Institute ( email )

Zurich
Switzerland

Zeno Enders

University of Heidelberg ( email )

Alexander Glas

Friedrich-Alexander University ( email )

Erlangen-Nuremberg
Germany

ZEW – Leibniz Centre for European Economic Research ( email )

P.O. Box 10 34 43
L 7,1
D-68034 Mannheim, 68034
Germany

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