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Measuring Inflation Expectations

Olivier Armantier (), Wändi Bruine de Bruin, Simon Potter (), Giorgio Topa (), Wilbert van der Klaauw () and Basit Zafar
Additional contact information
Olivier Armantier: Federal Reserve Bank of New York, New York, NY 10045
Wändi Bruine de Bruin: Centre for Decision Research, Leeds University Business School, Leeds LS2 9JT, United Kingdom

Annual Review of Economics, 2013, vol. 5, issue 1, 273-301

Abstract: To conduct monetary policy, central banks around the world increasingly rely on measures of public inflation expectations. In this article, we review findings from an ongoing initiative at the Federal Reserve Bank of New York aimed at improving the measurement and our understanding of household inflation expectations through surveys. We discuss the importance of question wording and the usefulness of new questions to elicit an individual’s distribution of inflation beliefs. We present evidence suggesting that consumers update their inflation expectations in response to new information and that information dissemination may lead to more informed and reliable reporting of inflation expectations. Finally, we report on a financially incentivized experiment suggesting that expectations surveys are informative and that respondents generally act on their stated beliefs in a way consistent with expected utility theory.

Keywords: surveys; information; updating; behavior; monetary policy; experiments (search for similar items in EconPapers)
JEL-codes: C81 D84 E31 E37 E64 (search for similar items in EconPapers)
Date: 2013
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Handle: RePEc:anr:reveco:v:5:y:2013:p:273-301