Learning from Potentially-Biased Statistics: Household Inflation Perceptions and Expectations in Argentina

39 Pages Posted: 21 Mar 2016

See all articles by Alberto Cavallo

Alberto Cavallo

Massachusetts Institute of Technology (MIT) - Sloan School of Management

Guillermo Cruces

Universidad Nacional de La Plata - Centro de Estudios Distributivos, Laborales y Sociales (CEDLAS); IZA

Ricardo Perez-Truglia

University of California, Los Angeles (UCLA); National Bureau of Economic Research (NBER)

Date Written: March 2016

Abstract

When forming expectations, households may be influenced by the possibility that the information they receive is biased. In this paper, we study how individuals learn from potentially-biased statistics using data from both a natural and a survey-based experiment obtained during a period of government manipulation of inflation statistics in Argentina (2006-2015). This period is interesting because of the attention to inflation information and the availability of both official and unofficial statistics. Our evidence suggests that rather than ignoring biased statistics or navively taking them at face value, households react in a sophisticated way, as predicted by a Bayesian learning model, effectively de-biasing the official data to extract all its useful content. We also find evidence of an asymmetric reaction to inflation signals, with expectations changing more when the inflation rate rises than when it falls. These results are useful for understanding the formation of inflation expectations in less extreme contexts than Argentina, such as the United States and Europe, where experts may agree that statistics are unbiased but households do not.

Suggested Citation

Cavallo, Alberto and Cruces, Guillermo and Perez-Truglia, Ricardo, Learning from Potentially-Biased Statistics: Household Inflation Perceptions and Expectations in Argentina (March 2016). NBER Working Paper No. w22103. Available at SSRN: https://ssrn.com/abstract=2752308

Alberto Cavallo (Contact Author)

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

100 Main Street
E62-416
Cambridge, MA 02142
United States

Guillermo Cruces

Universidad Nacional de La Plata - Centro de Estudios Distributivos, Laborales y Sociales (CEDLAS) ( email )

Centro de Estudios Distributivos, Laborales y
Sociales, Calle 6 e/47 y 48
La Plata, Provincia de Buenos Aires 1900
Argentina

HOME PAGE: http://cedlas.econo.unlp.edu.ar

IZA

P.O. Box 7240
Bonn, D-53072
Germany

Ricardo Perez-Truglia

University of California, Los Angeles (UCLA) ( email )

405 Hilgard Avenue
Box 951361
Los Angeles, CA 90095
United States

HOME PAGE: http://www.anderson.ucla.edu/perez-truglia

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
3
Abstract Views
100
PlumX Metrics