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Consumer Attitudes and the Epidemiology of Inflation Expectations

Michael Ehrmann (), Damjan Pfajfar () and Emiliano Santoro

Staff Working Papers from Bank of Canada

Abstract: This paper studies the formation of consumers’ inflation expectations using micro-level data from the Michigan Survey. It shows that beyond the well-established socio-economic determinants of inflation expectations such as gender, income or education, other characteristics such as the households’ financial situation and their purchasing attitudes also matter. Respondents with current or expected financial difficulties, pessimistic attitudes about major purchases, or expectations that income will go down in the future have considerably higher forecast errors, are further away from professional forecasts, and have a stronger upward bias in their expectations than other households. However, their bias shrinks by more than that of the average household in response to increasing media reporting about inflation.

Keywords: Inflation; and; prices (search for similar items in EconPapers)
JEL-codes: C53 D84 E31 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2014
New Economics Papers: this item is included in nep-cba, nep-mac, nep-mkt and nep-mon
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Working Paper: Consumer Attitudes and the Epidemiology of Inflation Expectations (2014) Downloads
Working Paper: Consumer Attitudes and the Epidemiology of Inflation Expectations (2014) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:bca:bocawp:14-28

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