Making Sense of Consumer Inflation Expectations: The Role of Uncertainty

Lovisa Reiche and Aidan Meyler

No 159, European Economy - Discussion Papers from Directorate General Economic and Financial Affairs (DG ECFIN), European Commission

Abstract: Consumers’ inflation expectations play a key role in the monetary transmission mechanism. As such, it is crucial for monetary policymakers to understand what they are and how they are formed. In this paper we introduce the (un)certainty channel as means to shed light on some of the more puzzling aspects of reported quantitative inflation perceptions and expectations. These include the apparent overestimation of inflation by consumers as well as the negative correlation observed between the economic outlook and inflation expectations. We also show that the uncertainty framework fits with some of the stylised facts of consumers’ inflation expectations, such as their correlation with socio-demographic characteristics and economic sentiment.

JEL-codes: D11 D12 D84 E31 E52 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2022-02
New Economics Papers: this item is included in nep-eec and nep-mon
References: Add references at CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
https://economy-finance.ec.europa.eu/publications/ ... -role-uncertainty_en (application/pdf)

Related works:
Working Paper: Making sense of consumer inflation expectations: the role of uncertainty (2022)
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: https://EconPapers.repec.org/RePEc:euf:dispap:159

Access Statistics for this paper

More papers in European Economy - Discussion Papers from Directorate General Economic and Financial Affairs (DG ECFIN), European Commission Contact information at EDIRC.
Bibliographic data for series maintained by ECFIN INFO ().