Exposure to Grocery Prices and Inflation Expectations

28 Pages Posted: 13 Aug 2019 Last revised: 19 Feb 2021

See all articles by Francesco D'Acunto

Francesco D'Acunto

Boston College

Ulrike Malmendier

University of California, Berkeley - Department of Economics; University of California, Berkeley - Haas School of Business; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR); Institute for the Study of Labor (IZA)

Juan Ospina

University of Chicago

Michael Weber

University of Chicago - Finance; National Bureau of Economic Research (NBER)

Multiple version iconThere are 3 versions of this paper

Date Written: November 30, 2020

Abstract

Consumers rely on the prices changes of goods in their grocery bundles when forming expectations about aggregate inflation. We use micro data that uniquely match individual expectations, detailed information about consumption bundles, and item-level prices. The weights consumers assign to price changes depend on the frequency of purchase, rather than expenditure share, and positive price changes loom larger than negative price changes. Prices of goods offered in the same store but not purchased do not affect inflation expectations, nor do other dimensions. Our results provide empirical guidance for models of expectations formation with heterogeneous consumers.

Keywords: Beliefs formation, heterogeneous agents, macroeconomics with micro data, household finance, behavioral finance

JEL Classification: C90, D14, D84, E31, E52, E71, G11

Suggested Citation

D'Acunto, Francesco and Malmendier, Ulrike and Ospina, Juan and Weber, Michael, Exposure to Grocery Prices and Inflation Expectations (November 30, 2020). Chicago Booth Research Paper No. 19-17 , Fama-Miller Working Paper , Available at SSRN: https://ssrn.com/abstract=3436357 or http://dx.doi.org/10.2139/ssrn.3436357

Francesco D'Acunto

Boston College ( email )

140 Commonwealth Avenue
Chestnut Hill, MA 02467
United States

Ulrike Malmendier

University of California, Berkeley - Department of Economics ( email )

549 Evans Hall #3880
Berkeley, CA 94720-3880
United States
(510) 642-8724 (Phone)
(510) 642-6615 (Fax)

HOME PAGE: http://www.econ.berkeley.edu/~ulrike/

University of California, Berkeley - Haas School of Business ( email )

545 Student Services Building, #1900
2220 Piedmont Avenue
Berkeley, CA 94720
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Institute for the Study of Labor (IZA)

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

HOME PAGE: http://www.iza.org/en/webcontent/personnel/photos/index_html?key=918

Juan Ospina

University of Chicago ( email )

1101 East 58th Street
Chicago, IL 60637
United States

Michael Weber (Contact Author)

University of Chicago - Finance ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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