Consumers' Attitudes and Their Inflation Expectations

FEDS Working Paper No. 2015-015

http://dx.doi.org/10.17016/FEDS.2015.015

31 Pages Posted: 19 Apr 2015

See all articles by Michael Ehrmann

Michael Ehrmann

European Central Bank (ECB); Bank of Canada

Damjan Pfajfar

Board of Governors of the Federal Reserve System

Emiliano Santoro

University of Copenhagen - Department of Economics

Date Written: March 3, 2015

Abstract

This paper studies consumers' inflation expectations using micro-level data from the Surveys of Consumers conducted by University of Michigan. It shows that beyond the well-established socio-economic factors such as income, age or gender, other characteristics such as the households' financial situation and their purchasing attitudes are important determinants of their forecast accuracy. Respondents with current or expected financial difficulties, pessimistic attitudes about major purchases, or expectations that income will go down in the future have a stronger upward bias in their expectations than other households. However, their bias shrinks by more than that of the average household in response to increasing media reporting about inflation. Equivalent results are found during recessions.

Keywords: Consumer Attitudes, Inflation Expectations, News on Inflation

JEL Classification: C53, D84, E31

Suggested Citation

Ehrmann, Michael and Pfajfar, Damjan and Santoro, Emiliano, Consumers' Attitudes and Their Inflation Expectations (March 3, 2015). FEDS Working Paper No. 2015-015. Available at SSRN: https://ssrn.com/abstract=2595719 or http://dx.doi.org/10.2139/ssrn.2595719

Michael Ehrmann

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany
+49 69 1344/7327 (Phone)
+49 69 1344/6000 (Fax)

Bank of Canada ( email )

234 Wellington Street
Ontario, Ottawa K1A 0G9
Canada

Damjan Pfajfar (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Emiliano Santoro

University of Copenhagen - Department of Economics ( email )

Ă˜ster Farimagsgade 5
Bygning 26
1353 Copenhagen K.
Denmark

Register to save articles to
your library

Register

Paper statistics

Downloads
69
Abstract Views
646
rank
330,079
PlumX Metrics