Inflation Experience and Inflation Expectations: Dispersion and Disagreement Within Demographic Groups

Benjamin K. Johannsen
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Benjamin K. Johannsen: https://www.federalreserve.gov/econres/benjamin-k-johannsen.htm

No 2014-89, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: Using consumption data from the Consumer Expenditure Survey, I document persistent differences across demographic groups in the dispersion of household-specific rates of inflation. Using survey data on inflation expectations, I show that demographic groups with greater dispersion in experienced inflation also disagree more about future inflation. I argue that these results can be rationalized from the perspective of an imperfect information model in which idiosyncratic inflation experience serves as a signal about aggregate inflation. These empirical regularities pose a challenge to several other popular models of the expectations formation process of households.

Keywords: Inflation; expectations; inflation experience (search for similar items in EconPapers)
Pages: 33 pages
Date: 2014-10-22
New Economics Papers: this item is included in nep-cba and nep-mon
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Citations: View citations in EconPapers (13)

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