Do actions speak louder than words? : household expectations of inflation based on micro consumption data /

Survey data on household expectations of inflation are routinely used in economic analysis, yet it is not clear how accurately households are able to articulate their expectations in survey interviews. We propose an alternative approach to recovering households' expectations of inflation from t...

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Bibliographic Details
Main Author: Inoue, Atsushi
Other Authors: Kilian, Lutz, Kiraz, Fatma Burcu
Format: Book
Language:English
Published: Frankfurt am Main : Deutsche Bundesbank, 2006
Series:Discussion paper (Deutsche Bundesbank). Series 1: economic studies ; no. 26/2006
Subjects:
Online Access:http://www.bundesbank.de/Redaktion/EN/Downloads/Publications/Discussion_Paper_1/2006/2006_08_29_dkp_26.pdf?__blob=publicationFile
Description
Summary:Survey data on household expectations of inflation are routinely used in economic analysis, yet it is not clear how accurately households are able to articulate their expectations in survey interviews. We propose an alternative approach to recovering households' expectations of inflation from their consumption expenditures. We show that these expectations measures have predictive power for consumer price index (CPI) inflation. They are better predictors of CPI inflation than household survey responses and more highly correlated with professional inflation forecasts, except for highly educated consumers, consistent with the view that more educated consumers are better able to articulate their expectations. We also document that households' inflation expectations respond to inflation news, as measured by the unpredictable component of inflation predictions in the Survey of Professional Forecasters. The response to inflation news tends to increase with households' level of education, consistent with the existence of constraints on household's ability to process this information. Copyright (c) 2009 The Ohio State University.
Physical Description:47 p.
Bibliography:Bibliografía: p. 27-30
ISBN:3865581870