Measuring Inflation Expectations

Posted: 7 Aug 2013

See all articles by Olivier Armantier

Olivier Armantier

Federal Reserve Bank of New York

Wändi Bruine de Bruin

Carnegie Mellon University

Simon Potter

Federal Reserve Bank of New York

Wilbert van der Klaauw

Federal Reserve Bank of New York; IZA

Giorgio Topa

Federal Reserve Bank of New York

Basit Zafar

Arizona State University

Date Written: January 2013

Abstract

To conduct monetary policy, central banks around the world increasingly rely on measures of public inflation expectations. In this article, we review findings from an ongoing initiative at the Federal Reserve Bank of New York aimed at improving the measurement and our understanding of household inflation expectations through surveys. We discuss the importance of question wording and the usefulness of new questions to elicit an individual’s distribution of inflation beliefs. We present evidence suggesting that consumers update their inflation expectations in response to new information and that information dissemination may lead to more informed and reliable reporting of inflation expectations. Finally, we report on a financially incentivized experiment suggesting that expectations surveys are informative and that respondents generally act on their stated beliefs in a way consistent with expected utility theory.

Suggested Citation

Armantier, Olivier and Bruine de Bruin, Wändi and Potter, Simon and van der Klaauw, H. Wilbert and Topa, Giorgio and Zafar, Basit, Measuring Inflation Expectations (January 2013). Annual Review of Economics, Vol. 5, pp. 273-301, 2013. Available at SSRN: https://ssrn.com/abstract=2306886 or http://dx.doi.org/10.1146/annurev-economics-081512-141510

Olivier Armantier

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States

Wändi Bruine de Bruin

Carnegie Mellon University ( email )

Pittsburgh, PA 15213-3890
United States

Simon Potter

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States
212-720-6309 (Phone)
212-720-1844 (Fax)

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 )

Giorgio Topa

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States

Basit Zafar

Arizona State University ( email )

WP Carey School of Business, ASU
Tempe, AZ 85287
United States
9179326564 (Phone)

HOME PAGE: http://https://sites.google.com/site/basitakzafar/

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