Consumer Attitudes and the Epidemiology of Inflation Expectations
CentER Discussion Paper Series No. 2014-029
36 Pages Posted: 24 Apr 2014
Date Written: April 23, 2014
This paper studies the formation of consumers inflation expectations using micro-level data from the Michigan Survey. It shows that beyond the well-established socio-economic determinants of inflation expectations like gender, income or education also other characteristics like the households financial situation and its purchasing attitudes matter. Respondents with current or expected financial difficulties, with pessimistic attitudes about major purchases, or who expect income to go down in the future have considerably higher forecast errors, are further away from professional forecasts and have a stronger upward bias in their expectations than other households. However, their bias shrinks by more than the one of the average household in response to increasing media reporting about inflation.
Keywords: Survey Inflation Expectations; News on Inflation; Information Stickiness; Consumer Attitudes.
JEL Classification: C53, D84, E31
Suggested Citation: Suggested Citation