What determines households inflation expectations? Theory and evidence from a household survey

Joshy Easaw, Roberto Golinelli and Marco Malgarini ()

European Economic Review, 2013, vol. 61, issue C, 1-13

Abstract: The purpose of the present paper is to study how households form inflation expectations using a novel survey dataset of Italian households. We extend the existing ‘inattentiveness’ literature by incorporating explicitly inflation targets and distinguishing between aggregate and disaggregate dynamics based on demographic groups. We also consider both the short- and long-run dynamics as households update their inflation expectations. While we find clear distinctions between the various demographic groups behavior, households tend to absorb professionals forecast. The short-run dynamics also indicate they not only overreact when updating their expectations but also adjust asymmetrically to any perceived momentum change of future inflation.

Keywords: Inflation expectations; Perceived inflation; Survey data; Heterogeneous panels; Nonlinear effects (search for similar items in EconPapers)
JEL-codes: C33 D1 D84 E1 E31 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (47)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:61:y:2013:i:c:p:1-13

DOI: 10.1016/j.euroecorev.2013.02.009

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