The Hidden Heterogeneity of Inflation and Interest Rate Expectations: The Role of Preferences

Lena Dräger, Michael Lamla and Damjan Pfajfar

No 402, Working Paper Series in Economics from University of Lüneburg, Institute of Economics

Abstract: Using a new consumer survey dataset, we study the role of macroeconomic preferences for expectations and economic decisions. While household expectations are inversely related to preferences, households with the same ination expectations can di_erently assess whether the level of expected ination and of nominal interest rates is appropriate or too high/too low. This `hidden heterogeneity' in expectations is correlated with sociodemographic characteristics and a_ects current and planned spending via the intertemporal elasticity of substitution. We also show that the variation in preferences can be explained with risk preferences. Overall, this adds a new dimension to the de_nition of anchored expectations.

Keywords: Macroeconomic expectations; monetary policy perceptions; ination and interestrate preferences; risk preferences; survey microdata (search for similar items in EconPapers)
JEL-codes: D84 E31 E52 E58 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2021-05
New Economics Papers: this item is included in nep-cba, nep-cwa, nep-mac and nep-mon
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Related works:
Working Paper: The Hidden Heterogeneity of Inflation and Interest Rate Expectations: The Role of Preferences (2023)
Working Paper: The Hidden Heterogeneity of Inflation and Interest Rate Expectations: The Role of Preferences (2022)
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