Consumer and firm inflation expectations

Carola Binder and Jane Ryngaert

Chapter 13 in Research Handbook on Inflation, 2025, pp 294-320 from Edward Elgar Publishing

Abstract: Inflation expectations significantly influence macroeconomic dynamics, making them crucial for monetary policymakers. This chapter delves into the inflation expectations of consumers and firms. It begins by reviewing major data sources on consumer expectations, highlighting key findings that challenge the full information rational expectations hypothesis. Notably, consumer expectations exhibit considerable heterogeneity and systematic deviations from professional forecasts. The chapter also examines the emerging data on firm expectations, noting both similarities and differences in expectation formation between consumers and firms. Furthermore, it explores behavioral factors and media influences on inflation expectations. Finally, the chapter discusses the implications of these expectations for consumption, household finances, firm behavior, and inflation dynamics, while identifying future research directions, particularly in the use of advanced analytical techniques.

Keywords: Inflation expectations; Consumer expectations; Firm expectations; Behavioral economics; Inflation; Monetary policy (search for similar items in EconPapers)
Date: 2025
ISBN: 9781035327751
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