Public Information and Inflation Expectations in Developing Countries: Microeconometric Evidence from a Natural Experiment

Posted: 26 Mar 2011 Last revised: 30 Nov 2011

See all articles by Paul E. Carrillo

Paul E. Carrillo

George Washington University - Department of Economics

M. Shahe Emran

George Washington University - Department of Economics

Date Written: March 22, 2011

Abstract

Governments provide public information about economic conditions to reduce information imperfections and facilitate efficient allocation of resources. Do households in developing countries rely on public signals to inform themselves about market conditions? To identify the importance of public information in households' price expectations, we take advantage of a unique natural experiment in Ecuador where the published inflation rate had been different from the correct rate over a period of 14 months due to a software error. We find that the public signal about prices plays an important role in households' price expectations and the change in price expectations in turn affects their savings choices; the effect is stronger for better educated and older people.

Keywords: Public Information, Price Expectations, Developing Countries, Natural Experiment, Heterogeneity

JEL Classification: O12, D10, D84

Suggested Citation

Carrillo, Paul E. and Emran, M. Shahe, Public Information and Inflation Expectations in Developing Countries: Microeconometric Evidence from a Natural Experiment (March 22, 2011). Review of Economics and Statistics, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1792654

Paul E. Carrillo

George Washington University - Department of Economics ( email )

Monroe Hall Suite 340
2115 G Street NW
Washington, DC 20052
United States

M. Shahe Emran (Contact Author)

George Washington University - Department of Economics ( email )

2115 G Street NW
302 Monroe Hall
Washington, DC 20052
United States

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