Uncertainty and Disagreement of Inflation Expectations: Evidence from Household-Level Qualitative Survey Responses

Yongchen Zhao

No 2021-03, Working Papers from Towson University, Department of Economics

Abstract: We propose a procedure that jointly estimates expectation, uncertainty, and disagreement using a flexible hierarchical ordered response model and individual-level qualitative data. Based on the Michigan survey of US consumers, our results reveal how their inflation expectations and the associated uncertainty are affected by various factors, including their perceptions of economic conditions, recollections of relevant news reports, and sociodemographic characteristics. An examination of the dynamics of inflation uncertainty and disagreement produces evidence in support of using the latter as a proxy of the former. However, our results also highlight important episodes (such as the start of the COVID pandemic) in which the two series diverge.

Keywords: Joint estimation; Quantification; Household demographics; Subjective news shocks; Hierarchical ordered response model. (search for similar items in EconPapers)
JEL-codes: C53 D80 E31 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2021-12, Revised 2021-12
New Economics Papers: this item is included in nep-cwa, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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http://webapps.towson.edu/cbe/economics/workingpapers/2021-03.pdf First version, 2021 (application/pdf)

Related works:
Journal Article: Uncertainty and disagreement of inflation expectations: Evidence from household‐level qualitative survey responses (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:tow:wpaper:2021-03

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