What determines households inflation expectations? Theory and evidence from a household survey

Easaw, Joshy ORCID: https://orcid.org/0000-0003-3476-4300, Golinelli, Roberto and Malgarini, Marco 2013. What determines households inflation expectations? Theory and evidence from a household survey. European Economic Review 61 , pp. 1-13. 10.1016/j.euroecorev.2013.02.009

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Abstract

The purpose of the present paper is to study how households form inflation expectations using a novel survey dataset of Italian households. We extend the existing ‘inattentiveness’ literature by incorporating explicitly inflation targets and distinguishing between aggregate and disaggregate dynamics based on demographic groups. We also consider both the short- and long-run dynamics as households update their inflation expectations. While we find clear distinctions between the various demographic groups behavior, households tend to absorb professionals forecast. The short-run dynamics also indicate they not only overreact when updating their expectations but also adjust asymmetrically to any perceived momentum change of future inflation.

Item Type:	Article
Date Type:	Publication
Status:	Published
Schools:	Business (Including Economics)
Publisher:	Elsevier
ISSN:	0014-2921
Date of Acceptance:	28 February 2013
Last Modified:	26 Oct 2022 08:16
URI:	https://orca.cardiff.ac.uk/id/eprint/127059

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