Inflation Expectations of Japanese Households: Micro Evidence from a Consumer Confidence Survey

Masahiro Hori and Masaaki Kawagoe

No 530, CIS Discussion paper series from Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University

Abstract: Economists unanimously agree that economic agents’ expectations are crucially important in determining macroeconomic outcomes. However, mainstream macroeconomists usually simply assume that expectations are rational, leaving unexamined the fundamental question whether individual agents’ actual expectations are rational or not. Against this background, this study examines the properties of Japanese households’ inflation expectations using micro-based inflation expectations data from the Monthly Consumer Confidence Survey Covering All of Japan. Our analyses show that actual inflation expectations by Japanese households are not rational in the sense that they are upward biased, at least ex post, and individual households appear not to instantaneously incorporate into their expectations information that is freely available from news reports on the views of professional forecasters. Our findings, moreover, suggest that while the sticky information model appears to better explain inflation expectations dynamics (than rational expectations models), we encounter a handful of facts that look inconsistent with the simple model.

Keywords: inflation expectations; consumer survey (search for similar items in EconPapers)
JEL-codes: D84 E31 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2011-11
New Economics Papers: this item is included in nep-cba
Note: This is a revised version of a paper originally presented at the ESRI International Conference 2009 in Tokyo on June 29, 2009.
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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https://hermes-ir.lib.hit-u.ac.jp/hermes/ir/re/21183/cis_dp530.pdf

Related works:
Journal Article: INFLATION EXPECTATIONS OF JAPANESE HOUSEHOLDS: MICRO EVIDENCE FROM A CONSUMER CONFIDENCE SURVEY (2013)
Working Paper: Inflation Expectations of Japanese Households:Micro Evidence from a Consumer Confidence Survey (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:hit:cisdps:530

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