Economic Literacy and Inflation Expectations: Evidence from a Laboratory Experiment

Mary Burke and Michael Manz

Journal of Money, Credit and Banking, 2014, vol. 46, issue 7, 1421-1456

Abstract: We present experimental evidence of a link between economic literacy and inflation forecast accuracy. The experiment investigates two channels through which economic literacy may enable better forecasts: (i) choice of information and (ii) use of information. More literate subjects choose more relevant information and use the given information more effectively. Starting from a 10th percentile score, the boost in literacy from taking an economics course predicts a 0.64 standard deviation decline in mean absolute forecasting error. Our findings suggest that a significant portion of demographic heterogeneity in inflation expectations—observed in survey data—may be driven by heterogeneity in economic literacy.

Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (33)

Downloads: (external link)
https://doi.org/10.1111/jmcb.12144

Related works:
Working Paper: Economic literacy and inflation expectations: evidence from a laboratory experiment (2011)
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:wly:jmoncb:v:46:y:2014:i:7:p:1421-1456

Access Statistics for this article

Journal of Money, Credit and Banking is currently edited by Robert deYoung, Paul Evans, Pok-Sang Lam and Kenneth D. West

More articles in Journal of Money, Credit and Banking from Blackwell Publishing
Bibliographic data for series maintained by Wiley Content Delivery ().