Heterogeneity in Household Inflation Expectations and Monetary Policy

Taeyoung Doh, Ji Hyung Lee and Woong Yong Park

Journal of Financial Econometrics, 2025, vol. 23, issue 1, 1263-1289

Abstract: We empirically characterize the heterogeneity in the conditional distribution of household inflation expectations across demographic groups using the Survey of Consumer Expectations and also investigate how monetary policy shocks affect the conditional distribution. We find that, across all the groups, the peak of the group-specific distribution of household inflation expectations aligns closely with the 2% target set by the Federal Reserve, but there is substantial heterogeneity both within and across groups, primarily on the right. However, in response to a contractionary monetary policy shock identified by high-frequency financial market responses, households overall adjust their inflation expectations significantly downwards. In addition, the magnitude of the reaction is more pronounced in the upper quantile of low-income groups whose unconditional inflation expectations are less well anchored.

Keywords: household inflation expectations; monetary policy; high-frequency identification; quantile regressions (search for similar items in EconPapers)
JEL-codes: E31 E52 E58 (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1093/jjfinec/nbae034 (application/pdf)
Access to full text is restricted to subscribers.

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:oup:jfinec:v:23:y:2025:i:1:p:1263-1289.

Ordering information: This journal article can be ordered from
https://academic.oup.com/journals

Access Statistics for this article

Journal of Financial Econometrics is currently edited by Allan Timmermann and Fabio Trojani

More articles in Journal of Financial Econometrics from Oxford University Press Oxford University Press, Great Clarendon Street, Oxford OX2 6DP, UK. Contact information at EDIRC.
Bibliographic data for series maintained by Oxford University Press ().