Greater Than the Sum of Its Parts: Aggregate vs. Aggregated Inflation Expectations

Alexander Dietrich, Edward Knotek, Kristian O. Myrseth, Robert Rich, Raphael Schoenle and Michael Weber

No 31822, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper introduces a novel measure of consumer inflation expectations: We elicit and combine inflation forecasts across categories of personal consumption expenditure to form an aggregated measure of inflation expectations. Drawing on nearly 60,000 respondents, our data comprise the early low-inflation environment of the COVID pandemic and the 2021 inflation surge. Conventionally elicited inflation expectations consistently exceed aggregated measures constructed under plausible weighting schemes. Aggregated measures display less disagreement and volatility and are stronger predictors of consumers’ spending plans. The relative informational value of aggregated measures rises with the individual-level gap between conventional and aggregated inflation expectations. Our results chart a new course for designing measurement of inflation expectations.

JEL-codes: C83 E31 E52 (search for similar items in EconPapers)
Date: 2023-11
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