Imperfect Information and Inflation Expectations: Evidence from Microdata

Michael Lamla and Lena Dräger

VfS Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order from Verein für Socialpolitik / German Economic Association

Abstract: We investigate the updating behavior of individual consumers regarding their short- and long-run inflation expectations. Utilizing the University of Michigan Survey of Consumer's rotating panel microstructure, we can identify whether individuals adjust their inflation expectations over a period of six months. We find evidence that the updating frequency has been underestimated. Furthermore, looking at the possible determinants of an update we find support for imperfect information models. Moreover, individual expectations are found to be more accurate after an update and forecast accuracy is affected by inflation volatility measures and news regarding inflation. Finally, the updating frequency is found to significantly move spreads in bond markets.

JEL-codes: D84 E31 E50 (search for similar items in EconPapers)
Date: 2013
New Economics Papers: this item is included in nep-cba and nep-mac
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Citations: View citations in EconPapers (2)

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Working Paper: Imperfect Information and Inflation Expectations: Evidence from Microdata (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc13:79908

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