Consumer Forecast Revisions: Is Information Really so Sticky?

Abstract

Previous studies using consumer survey data on inflation expectations find that consumers revise their inflation forecasts approximately once every eight months, suggesting that information is quite "sticky." However, in the consumer survey data analyzed, respondents take the survey twice with a six-month gap, and responses are reported to the nearest integer. Both the low frequency and the rounding result in overestimation of information stickiness. Higher-frequency unrounded data reveals that consumers revise their inflation expectations far more frequently---about five times in an eight month period.

Keywords: Inflation expectations, information rigidities, sticky information, consumer surveys

JEL Classification: E31, D83, D84