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A naïve sticky information model of households' inflation expectations

Markku Lanne, Arto Luoma and Jani Luoto

Journal of Economic Dynamics and Control, 2009, vol. 33, issue 6, 1332-1344

Abstract: This paper shows that the Michigan survey data on inflation expectations is consistent with a simple sticky information model where a significant proportion of households base their inflation expectations on the past release of actual inflation rather than the rational forward-looking forecast. In particular, the model can explain both the mean and cross-sectional distribution of households' inflation expectations.

Keywords: Inflation; expectations; Heterogeneous; expectations; Survey; expectations; Sticky; information; Bayesian; analysis (search for similar items in EconPapers)
Date: 2009
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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:33:y:2009:i:6:p:1332-1344

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Journal of Economic Dynamics and Control is currently edited by J. Bullard, C. Chiarella, H. Dawid, C. H. Hommes, P. Klein and C. Otrok

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