Measuring Inflation Expectations: Consumers' Heterogeneity and Nonlinearity

Naohito Abe and Yuko Ueno

No DP15-5, RCESR Discussion Paper Series from Research Center for Economic and Social Risks, Institute of Economic Research, Hitotsubashi University

Abstract: Using the results of detailed random experiments, we find clear evidence of the effects of information provision on consumers’ inflation expectations. The responses of expectations to new information are nonlinear, including those of a sizable share of individuals who do not change their expectations. We document that the updates of consumers are quite heterogeneous, leading to a varied extent of revisions in the face of new information. One possible interpretation is the heterogeneity in consumers’ knowledge of inflation-related issues, as well as the difference in the content of the information. Consumers learn and update their expectations vis-à-vis future inflation based on new information, through a mechanism that is more complex than a simple learning model.

Keywords: Inflation expectations; Information; Heterogeneous updating; Nonlinearity; Survey experiments (search for similar items in EconPapers)
JEL-codes: C81 D80 E31 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2015-06
New Economics Papers: this item is included in nep-exp, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:hit:rcesrs:dp15-5

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