Learning, Heuristics and Anchored Inflation: How Do Different Types of Consumer Change Their Minds about Inflation?

Kevin Lee, Viet Nguyen and Kalvinder Shields

CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University

Abstract: Alternative models of actual and expected inflation are estimated to investigate how, in real time and as information arrives, different types of consumer learn about inflation. The models distinguish various views about learning including those based on Bayesian updating or on learning-rigidity heuristics. Using a detailed Australian survey, we find that learning is best characterised by periodic shifts in beliefs rather than incremental Bayesian adjustments, that different consumer groups learn at different times and from different experiences and that the inflation expectations of different groups are anchored on a range of reference inflation rates which do not move in sync.

Keywords: learning; updating; expectations; surveys; demographic groups; inflation anchor (search for similar items in EconPapers)
JEL-codes: C32 D84 E31 E32 (search for similar items in EconPapers)
Pages: 52 pages
Date: 2025-05
New Economics Papers: this item is included in nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:een:camaaa:2025-28

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