Inflation Expectations and Behavior: Do Survey Respondents Act on Their Beliefs?

32 Pages Posted: 29 Apr 2015

See all articles by Olivier Armantier

Olivier Armantier

Federal Reserve Bank of New York

Wändi Bruine de Bruin

Carnegie Mellon University

Giorgio Topa

Federal Reserve Bank of New York

Wilbert van der Klaauw

Federal Reserve Bank of New York; IZA

Basit Zafar

Arizona State University

Multiple version iconThere are 2 versions of this paper

Date Written: May 2015

Abstract

We compare the inflation expectations reported by consumers in a survey with their behavior in a financially incentivized investment experiment. The survey is found to be informative in the sense that the beliefs reported by the respondents are correlated with their choices in the experiment. More importantly, we find evidence that most respondents act on their inflation expectations showing patterns consistent with economic theory. Respondents whose behavior cannot be rationalized tend to have lower education and lower numeracy and financial literacy. These findings help confirm the relevance of inflation expectations surveys and provide support to the microfoundations of modern macroeconomic models.

Suggested Citation

Armantier, Olivier and Bruine de Bruin, Wändi and Topa, Giorgio and van der Klaauw, H. Wilbert and Zafar, Basit, Inflation Expectations and Behavior: Do Survey Respondents Act on Their Beliefs? (May 2015). International Economic Review, Vol. 56, Issue 2, pp. 505-536, 2015. Available at SSRN: https://ssrn.com/abstract=2600302 or http://dx.doi.org/10.1111/iere.12113

Olivier Armantier (Contact Author)

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

Giorgio Topa

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States

H. Wilbert Van der Klaauw

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 )

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/

Register to save articles to
your library

Register

Paper statistics

Downloads
0
Abstract Views
347
PlumX Metrics