What Do the Data Tell Us about Inflation Expectations?

Arbeitspapier

Inflation expectations are central to economics because they affect the effectiveness of fiscal and monetary policy as well as realized inflation. We survey the recent literature with a focus on the inflation expectations of households. We first review standard data sources and discuss their advantages and disadvantages. We then document that household inflation expectations are biased upwards, dispersed across individuals, and volatile in the time series. We also provide evidence of systematic differences by gender, income, education, and race. Turning to the underlying expectations formation process, we highlight the role of individuals' exposure to price signals in their daily lives, such as price changes in groceries, the role of lifetime experiences, and the role of cognition. We then discuss the literature that links inflation expectations to economic decisions at the individual level, including consumption-savings and financial decisions. We conclude with an outlook for future research.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 9602

Classification and Topics

• Classification: Wirtschaft ; Design of Experiments: General ; Household Saving; Personal Finance ; Expectations; Speculations ; Price Level; Inflation; Deflation ; Monetary Policy ; Macro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on the Macro Economy‡ ; Portfolio Choice; Investment Decisions
• Subject: beliefs formation ; heterogeneous agents ; macroeconomics with micro data ; inflation exposure ; experience effects ; financial sophistication

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): D'Acunto, Francesco ; Malmendier, Ulrike M. ; Weber, Michael
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2022

Further information

• Handle: http://hdl.handle.net/10419/252119
• Last update: 10.03.2025, 11:44 AM CET