Formation, heterogeneity and theory consistency of inflation expectations in the euro area

Athanasios Angelis and Athanasios Tagkalakis
Additional contact information
Athanasios Angelis: University of Patras, PwC

No 343, Working Papers from Bank of Greece

Abstract: Using microdata from the European Consumer Survey (CES) for 11 European countries and 53 months, we investigate the formation and heterogeneity of inflation expectations as well as their theory consistency with the Phillips curve in the euro area, and across countries and demographic groups. We examine how individuals in the euro area form their inflation expectations. Our findings show that people place significant weight on their current perception of inflation. Past experiences with prices also play a role, though to a lesser extent. Importantly, the formation of expectations tends to be forward-looking rather than backward-looking. A similar pattern emerges when we analyze the consistency of these expectations and perceptions with the Phillips Curve theory. Individuals in the euro area generally do not hold theory-consistent expectations regarding inflation. We find notable variations across gender, age, income, education level, household size regarding the formation of inflation expectation.

Keywords: Expectations; Perceptions; Inflation; Phillips Curve; Consumer Survey (search for similar items in EconPapers)
JEL-codes: D84 E31 (search for similar items in EconPapers)
Pages: 49
Date: 2025-06
References: Add references at CitEc
Citations:

Downloads: (external link)
https://doi.org/10.52903/wp2025343 Full Text (application/pdf)
Our link check indicates that this URL is bad, the error code is: 403 Forbidden (https://doi.org/10.52903/wp2025343 [302 Found]--> https://www.bankofgreece.gr/Publications/Paper2025343.pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bog:wpaper:343

Access Statistics for this paper

More papers in Working Papers from Bank of Greece Contact information at EDIRC.
Bibliographic data for series maintained by Anastasios Rizos ().