Public Information and Inflation Expectations: Microeconometric Evidence from a Natural Experiment

Paul Carrillo and M. Shahe Emran

The Review of Economics and Statistics, 2012, vol. 94, issue 4, 860-877

Abstract: Governments provide public information to reduce information imperfections. Do households rely on public signals to inform themselves about market conditions? To identify the importance of public information in households' price expectations, we take advantage of a unique natural experiment in Ecuador where the published inflation rate had been different from the correct rate over a period of fourteen months due to a software error. We find that the public signal about prices plays an important role in households' price expectations, and the change in price expectations affects their savings choices. The effect is stronger for better-educated and older people. © 2012 The President and Fellows of Harvard College and the Massachusetts Institute of Technology.

Keywords: public information; price expectations; developing countries; natural experiment; heterogeneity; Ecuador (search for similar items in EconPapers)
JEL-codes: D10 D84 O12 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (11)

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