Subjective inflation expectations of households

Michael Weber

Business Economics, 2022, vol. 57, issue 4, No 8, 217-221

Abstract: Abstract Inflation expectations of households and firms are central determinants in all dynamic macro models. Yet, empirical evidence suggests these decision makers form expectations in a way that deviates from the assumptions in these models: on average, inflation expectations are biased upwards, are substantially dispersed across individuals, and co-move strongly with the prices of selected goods such as milk or gas. In this article, I discuss several stylized facts on subjective inflation expectations, their determinants, and how inflation expectations shape individuals’ consumption, savings, and investment decisions. Finally, I review the recent literature on how central banks should communicate with the general public and highlight the role of the policy message, the messenger, and the medium, for the effectiveness of central bank communication.

Keywords: Intertemporal choice; Consumption; Savings; Surveys; Monetary and Fiscal policy (search for similar items in EconPapers)
JEL-codes: D1 D2 D8 D9 E2 E3 E4 E5 E7 J1 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (11)

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DOI: 10.1057/s11369-022-00295-y

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