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The Hidden Heterogeneity of Inflation and Interest Rate Expectations: The Role of Preferences

Lena Dräger, Michael Lamla (), Damjan Pfajfar and Lena Dräger
Authors registered in the RePEc Author Service: Lena Dräger ()

No 9637, CESifo Working Paper Series from CESifo

Abstract: Using a new consumer survey dataset, we show that macroeconomic preferences affect expectations and economic decisions through different channels. While household expectations are on average inversely related to preferences, households with the same inflation or interest rate expectations can differently assess whether the level of the corresponding variable is appropriate or too high/too low. This `hidden heterogeneity' in expectations is correlated with sociodemographic characteristics and affects durable spending and saving decisions. We also show that the variation in inflation preferences can be explained with risk preferences. Overall, this adds a new dimension to the definition of anchored expectations.

Keywords: macroeconomic expectations; monetary policy perceptions; inflation and interest rate preferences; risk preferences; survey microdata (search for similar items in EconPapers)
JEL-codes: D84 E31 E52 E58 (search for similar items in EconPapers)
Date: 2022
New Economics Papers: this item is included in nep-cba, nep-eec, nep-mac and nep-mon
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Working Paper: The Hidden Heterogeneity of Inflation and Interest Rate Expectations: The Role of Preferences (2021) Downloads
Working Paper: The Hidden Heterogeneity of Inflation and Interest Rate Expectations: The Role of Preferences (2021) Downloads
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