Economics at your fingertips  

The Price Is Right: Updating Inflation Expectations in a Randomized Price Information Experiment

Olivier Armantier, Scott Nelson, Giorgio Topa (), Wilbert van der Klaauw () and Basit Zafar
Additional contact information
Olivier Armantier: Federal Reserve Bank of New York
Scott Nelson: MIT

The Review of Economics and Statistics, 2016, vol. 98, issue 3, 503-523

Abstract: Using a unique, randomized information experiment embedded in a survey, this paper investigates how consumers’ inflation expectations respond to new information. We find that respondents, on average, update their expectations in response to (certain types of) information, and do so sensibly, in a manner consistent with Bayesian updating. As a result of information provision, the distribution of inflation expectations converges toward its center and cross-sectional disagreement declines. We document heterogeneous information processing by gender and present suggestive evidence of respondents forecasting under asymmetric loss. Our results provide support for expectation-formation models in which agents form expectations rationally but face information constraints.

Keywords: inflation expectations; information; heterogeneous expectations; updating; Bayesian learning (search for similar items in EconPapers)
JEL-codes: C81 D80 E31 (search for similar items in EconPapers)
Date: 2016
References: Add references at CitEc
Citations: View citations in EconPapers (21) Track citations by RSS feed

Downloads: (external link) (application/pdf)
Access to full text is restricted to subscribers.

Related works:
Working Paper: The price is right: updating of inflation expectations in a randomized price information experiment (2012) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Ordering information: This journal article can be ordered from
https://mitpressjour ... rnal/?issn=0034-6535

Access Statistics for this article

The Review of Economics and Statistics is currently edited by Amitabh Chandra, Olivier Coibion, Bryan S. Graham, Shachar Kariv, Amit K. Khandelwal, Asim Ijaz Khwaja, Brigitte C. Madrian and Rohini Pande

More articles in The Review of Economics and Statistics from MIT Press
Bibliographic data for series maintained by Ann Olson ().

Page updated 2020-07-08
Handle: RePEc:tpr:restat:v:98:y:2016:i:3:p:503-523