Abstract
This paper examines qualitative quarterly survey data on U.K. consumers price anticipations in the context of a framework designed to allow the authors to test the predictive ability of consumers and the information content of this survey data. The results indicate that the survey data contains useful information but that it is biased in particular ways. Consumers appear to have short memories of past inflation but given this, they appear to use additional information to that contained in recent past price changes in order to forecast future inflation. In particular they may take current short term interest rates into account. Only those households expecting high inflation rates are important in predicting inflation. Copyright 1992 by Royal Economic Society.
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