How income expectations adjust to inflation – a consumers’ expectations-revealed pass-through

Virginia Di Nino and Valentina Aprigliano

No 2986, Working Paper Series from European Central Bank

Abstract: We use inflation and income growth expectations from the ECB Consumer Expectations Survey to measure the subjective expected pass-through of inflation to income in the main euro area countries. By aggregating consumers’ responses to probabilistic questions, we obtain significantly higher estimates of the pass-through than those obtained from micro data. Our methodology allows one to examine how the pass-through varies along the probability distribution of expected inflation, which turns out to be particularly large for moderate inflation expectations. We find significant heterogeneity in the inflation pass-through across countries, ages and income groups, consistent with different wage and pension indexation regimes. JEL Classification: C10, C22, E31, E66

Keywords: consumer expectations survey; price-wage spiral; regression across quantiles; subjective probability forecasts aggregation (search for similar items in EconPapers)
Date: 2024-10
New Economics Papers: this item is included in nep-cba, nep-eec and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20242986

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