Are Consumer Expectations Theory-Consistent? The Role of Macroeconomic Determinants and Central Bank Communication

Michael Lamla, Lena Dräger and Damjan Pfajfar

VfS Annual Conference 2015 (Muenster): Economic Development - Theory and Policy from Verein für Socialpolitik / German Economic Association

Abstract: Using the microdata of the Michigan Survey of Consumers, we evaluate whether U.S. consumers form macroeconomic expectations consistent with different economic concepts. We observe that 50\% of consumers have expectations consistent with the Income Fisher equation, 46\% with the Taylor rule and 34\% with the Phillips curve. For the Taylor rule and the Phillips curve we observe less consistency during recessions and with high inflation. Moreover, changes in the communication policy of the Fed affect consistency. The strongest positive effect comes from the introduction of the official inflation target. Finally, consumers with theory-consistent expectations have lower absolute inflation forecast errors.

JEL-codes: C25 D84 E52 (search for similar items in EconPapers)
Date: 2015
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mkt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/113170/1/VfS_2015_pid_199.pdf (application/pdf)

Related works:
Working Paper: Are Consumer Expectations Theory-Consistent? The Role of Macroeconomic Determinants and Central Bank Communication (2014)
Working Paper: Are Consumer Expectations Theory-Consistent? The Role of Macroeconomic Determinants and Central Bank Communication (2013)
Working Paper: Are Consumer Expectations Theory-Consistent? The Role of Macroeconomic Determinants and Central Bank Communication (2013)
Working Paper: Are Consumer Expectations Theory-Consistent? The Role of Macroeconomic Determinants and Central Bank Communication (2013)
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:zbw:vfsc15:113170

Access Statistics for this paper

More papers in VfS Annual Conference 2015 (Muenster): Economic Development - Theory and Policy from Verein für Socialpolitik / German Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().