Arbeitspapier

Energy prices and inflation expectations: Evidence from households and firms

I investigate how households and firms adjust their inflation expectations when experiencing an increase in their energy prices. I use monthly panel survey data in combination with a difference-in-difference approach to show that households increase their inflation expectations when they personally experience an increase in their electricity prices. This result is inconsistent with full-information rational expectations but can be rationalized by households extrapolating their personal experience. The effect is driven by low-income households, households who are uninformed about past inflation, and those not trusting the ECB. Due to households extrapolating, their inflation forecasts become less accurate and diverge more from professional forecasts. Contrary to households, firms do not extrapolate energy price increases to their inflation expectations. Thus, decision-makers in firms form their expectations similarly to high-income households.

ISBN
978-3-95729-962-8
Sprache
Englisch

Erschienen in
Series: Deutsche Bundesbank Discussion Paper ; No. 28/2023

Klassifikation
Wirtschaft
Household Saving; Personal Finance
Firm Behavior: Empirical Analysis
Expectations; Speculations
Price Level; Inflation; Deflation
Energy: Demand and Supply; Prices
Thema
inflation expectations
households
firms
energy prices
extrapolation

Ereignis
Geistige Schöpfung
(wer)
Wehrhöfer, Nils
Ereignis
Veröffentlichung
(wer)
Deutsche Bundesbank
(wo)
Frankfurt a. M.
(wann)
2023

Handle
Letzte Aktualisierung
10.03.2025, 11:44 MEZ

Datenpartner

Dieses Objekt wird bereitgestellt von:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.

Objekttyp

  • Arbeitspapier

Beteiligte

  • Wehrhöfer, Nils
  • Deutsche Bundesbank

Entstanden

  • 2023

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