Household Inflation Expectation and Consumption: Evidence from Japan

Ryo Jinnai (), Tomoaki Mikami, Tatsushi Okuda and Jouchi Nakajima

Economic Review, 2021, vol. 72, issue 3, 268-295

Abstract: We study household inflation expectation and consumption decisions jointly, using the micro-levelpanel dataset based on household surveys in Japan when nominal interest rates stay at the effectivelower bound. We find that a rise in household inflation expectation generally leads to a rise in currentconsumption relative to future. However, we find that this relation may not be robust in somesituations. Specifically, changes in household inflation expectations along with the fluctuation in foodand energy prices have a little impact on consumption, whereas changes in their inflation expectationsdue to other factors have a strong impact. Building a formal model and calibrate its parameters, weshow that these results can be interpreted as the householdʼs optimal behavior under imperfectinformation.

JEL-codes: E21 E50 E61 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:hit:ecorev:v:72:y:2021:i:3:p:268-295

DOI: 10.15057/71970

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