The formation of inflation perceptions: Some empirical facts for European countries

Arbeitspapier

This paper investigates how households form their perceptions of consumer price inflation. Using data from the harmonized EU consumer survey, we find that inflation perceptions are inefficient and highly heterogeneous, yet contemporaneously related to the actual rate of inflation. Consequently, we estimate how often households update their beliefs employing Carroll's (2003) epidemiological model. Our results indicate that inflation perceptions are generally less responsive to new information than expectations. Unlike studies on expectations, we cannot confirm that a constant fraction of the population updates information every month. Also, the cross-sectional heterogeneity of perceptions is higher than implied by infrequent updating alone.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: KOF Working Papers ; No. 204

Classification and Topics

• Classification: Wirtschaft ; Price Level; Inflation; Deflation ; Monetary Policy, Central Banking, and the Supply of Money and Credit: General ; Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
• Subject: inflation perceptions ; belief formation ; sticky information models ; Inflation ; Öffentliche Meinung ; Informationsverhalten ; EU-Staaten

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Lein, Sarah M. ; Maag, Thomas
• Event: Veröffentlichung
• (who): ETH Zurich, KOF Swiss Economic Institute
• (where): Zurich
• (when): 2008

Further information

• DOI: doi:10.3929/ethz-a-005666792
• Handle: http://hdl.handle.net/10419/50341
• Last update: 10.03.2025, 11:41 AM CET