The Effect of Question Wording on Reported Expectations and Perceptions of Inflation

37 Pages Posted: 23 Apr 2010

See all articles by Wändi Bruine de Bruin

Wändi Bruine de Bruin

Carnegie Mellon University

Wilbert van der Klaauw

Federal Reserve Bank of New York; IZA

Julie S. Downs

Carnegie Mellon University

Baruch Fischhoff

Department of Engineering and Public Policy, Institute for Politics and Strategy, Carnegie Mellon University

Giorgio Topa

Federal Reserve Bank of New York

Olivier Armantier

Federal Reserve Bank of New York

Date Written: April 1, 2010

Abstract

Public expectations and perceptions of inflation may affect economic decisions, and have subsequent effects on actual inflation. The Michigan Survey of Consumers uses questions about “prices in general” to measure expected and perceived inflation. Median responses track official measure of inflation, showing some tendency toward overestimation and considerable disagreement between respondents. Possibly, responses reflect how much respondents thought of salient personal experiences with specific prices when being asked about “prices in general.” Here, we randomly assigned respondents to questions about “prices in general,” as well as “the rate of inflation” and “price you pay.” Reported expectations and perceptions were higher and more dispersed for “prices in general” than for “the rate of inflation,” with “prices you pay” and “prices in general” showing similar responses patterns. Compared to questions about “the rate of inflation,” questions about “prices in general” and “prices you pay” focused respondents relatively more on personal price experiences - and elicited expectations that were more strongly correlate to the expected price increases for food and transportation, which were relatively large and likely salient, but not to the expected price increases for housing, which were relatively small and likely less salient. Our results have implications for survey measures of inflation expectations.

Keywords: Inflation Expectations, Question Design, Consumer Surveys

JEL Classification: E31, D84, C83

Suggested Citation

Bruine de Bruin, Wändi and van der Klaauw, H. Wilbert and Downs, Julie S. and Fischhoff, Baruch and Topa, Giorgio and Armantier, Olivier, The Effect of Question Wording on Reported Expectations and Perceptions of Inflation (April 1, 2010). FRB of New York Staff Report No. 443. Available at SSRN: https://ssrn.com/abstract=1594890 or http://dx.doi.org/10.2139/ssrn.1594890

Wändi Bruine de Bruin

Carnegie Mellon University ( email )

Pittsburgh, PA 15213-3890
United States

H. Wilbert Van der Klaauw (Contact Author)

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States
212-720-5916 (Phone)
212-720-1844 (Fax)

IZA ( email )

Julie S. Downs

Carnegie Mellon University ( email )

Pittsburgh, PA 15213-3890
United States

Baruch Fischhoff

Department of Engineering and Public Policy, Institute for Politics and Strategy, Carnegie Mellon University ( email )

Baker Hall 129
5000 Forbes Avenue
Pittsburgh, PA 15213
United States
412-268-3246 (Phone)

Giorgio Topa

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States

Olivier Armantier

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
53
Abstract Views
774
rank
373,646
PlumX Metrics