Do Household Expectations Help Predict Inflation?

Luis Brandao-Marques, R. Gaston Gelos (), David Hofman, Julia Otten, Gurnain Kaur Pasricha and Zoe Strauss
Authors registered in the RePEc Author Service: Luis Brandao Marques

No 18774, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We examine whether changes in the distribution of household inflation expectations contain information on future inflation. We first discuss recent shifts in micro data from the US, UK, Germany, and Canada. We then zoom in on the US to explore econometrically whether distributional characteristics help predict future inflation. We find that the shape of the distribution of household expectations does indeed help predict one-year-ahead CPI inflation. Variance and skewness of household expectations’ distributions add predictive power beyond and above the median, especially in periods of high inflation. Remarkably, qualitatively, these results hold when including market-based measures and moments of the distribution of professional forecasts.

Keywords: Inflation; Inflation expectations; Survey expectations; Households expectations (search for similar items in EconPapers)
JEL-codes: E52 E58 (search for similar items in EconPapers)
Date: 2024-01
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Working Paper: Do Household Expectations Help Predict Inflation? (2023)
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