Downward Rigidity in Householdss Price Expectations: An Analysis Based on the Bank of Japan's 'Opinion Survey on the General Public's Views and Behavior'

The aim of this paper is to recognize and analyze the heterogeneities in accuracy of one year ahead inflation expectations of consumers among different income groups in Poland under the different inflation environments: (1) high inflation environment, (2) low inflation environment, and (3) credible inflation environment. The time span covers May 2001-December 2023. The qualitative EC Business and Consumer Survey inflation expectations have been quantified with the use of Carlson and Parking method adjusted by Batchelorr and Orr. The accuracy of inflation expectations has been analyzed via forecasts errors and verified with the use of HLN test and Diebold-Mariano test. The main conclusion is that the non-credible inflation environment generates heterogeneity in inflation expectations accuracy among the opposite income groups.

Japan’s encounter with deflation and near‐zero‐interest short‐term interest rates in the 1990s led to a surge in research on the implications of the zero lower bound (ZLB) on nominal interest rates for monetary policy around the end of that decade. Based on model simulations, the literature at that time identified a number of key implications of the ZLB (see Orphanides and Wieland [2000], Reifschneider and Williams [2000, 2002], Eggertsson and Woodford [2003], and references therein). First, with low inflation targets of the kind followed by many central banks, the ZLB will frequently be a binding constraint on monetary policy. That is, Japan’s example is not an outlier but rather a harbinger for the future. Second, at inflation targets of 1% or lower, lowering the inflation target comes at a cost of higher variability of output and inflation, although the effects on inflation variability are relatively small. This analysis provides an argument for maintaining a positive inflation target cushion above 1%. Third, in rare instances of severe prolonged recessions accompanied by deflation, standard open market operations will be insufficient to bring the inflation rate back to target, andalternative sources of stimulus to the economy, such as fiscal policy, will be needed. Fourth, central banks can significantly reduce the effects of the ZLB onmacroeconomic stability by modifying their policy actions and communication to the public when the ZLB threatens to constrain policy. Specifically, policies that cut rates aggressively when deflation is a risk and promise to temporarily target a higher rate of inflation following episodes where the ZLB binds were found to greatly reduce the effects of the ZLB in model simulations. In the decade since this researchwas initiated, the ZLB has gone froma theoretical issue applying to Japan to one that plagues many industrialized economies. Indeed, an era of overwhelming confidence in monetary policy’s power to tame the business cycle while delivering low and stable inflation has been replaced by fears that the global economy could

The paper focuses on inflation expectations management in a low inflation or deflation environment. Firstly, it presents theoretical findings on avoiding and escaping the deflation trap. They are closely related to expectations management as expectations become the main transmission channel in the zero lower bound (ZLB) environment. In response to the recent economic crisis some of the following solutions have been applied by central banks: quantitative easing, forward guidance and depreciation. Their use is not detrimental to the framework of inflation targeting strategy. Secondly, some remarks about the difficulties of measuring expectations during the occurrence of ZLB and in a crisis situation are made. The information on expectations levels, their distribution, volatility and the degree to which they are anchored is crucial for central banks, especiallywhen the expectations offer the most effective way to affect the economy. Finally, a comparison of the expectations quantified with the Carlson and Parkin probabilistic method and its version adjusted for non-positive scaling factor periods is made. The empirical part of the research covers Poland (July 2014 – December 2015) and Sweden (November 2012 – December 2015). Both countries experience deflation, and (additionally) Sweden operates under ZLB. An alternative method of quantification smoothes the expectations and reduces their volatility. The subject dealt with in this paper is still under theoretical and empirical examination. No conclusion as to the optimal solution for expectations management is made.

To what extent financial crisis whose sharp phase begun in 2008 and low inflation environment that started in 2013 affect inflation expectations in Poland? Have inflation expectations of the private sector become more forward-looking? Is monetary policy still able to influence expectations as compared with the pre-crisis period? Those are the main questions addressed in this paper. To answer them we analyse survey-based measures of inflation expectations of consumers, enterprises and financial sector analysts. Estimation of simple and extended hybrid models of inflation expectations combined with verification of orthogonality of expectational errors with respect to available information leads us to the conclusion that since 2008 inflation expectations of enterprises and financial sector analysts have become more forward-looking, better exploiting available information and more sensitive to interest rate changes and developments in the real economy. At the same time formation of consumer inflation expectations has not been affected significantly.

Over the past decade increasing use has been made of direct information on price expectations in empirical studies of the expectations formation process. In the United States, Livingston's inflation expectation series have been extensively analysed by Turnovsky (I970), Turnovsky and Wachter (I972), Pesando (I975), McGuire (I976), Carlson (I977), Mullineaux (I978, I980), Jacobs and Jones (I980), Figlewski and Wachter (I98I) and others. In the United Kingdom, the general public expectations of consumer prices made available in the Gallup polls have been studied by Carlson and Parkin (I975), Holden and Peel (I977), Smith (I982), Severn (1983) and Evans and Gulamani (I984). Similar studies have also been carried out with respect to surveys conducted in Germany, France and most other OECD countries. However, despite the apparent importance of businessmen's expectations for the understanding of the inflationary process, the empirical research on inflation expectations in the United Kingdom has been mainly concerned with the consumers' price expectations.' The present paper is an attempt to rectify this shortcoming by extending the empirical analysis of the inflation expectation process to British manufacturing industries using the results of the industrial trend surveys conducted by the Confederation of British Industries (CBI). The plan of the paper is as follows: Section I deals with the methodological problems of deriving quantitative inflation expectations series from qualitative responses such as the ones reported in the CBI surveys. The subjective probability method due to Theil, Carlson and Parkin, and the regression method recently proposed by the author (Pesaran, I984) for the conversion of categorical responses to quantitative measures are briefly discussed. Section II sets out the alternative models of inflation expectations formation. Section III describes the data on inflation expectations in British manufacturing industries, and discusses the forecasting value of alternative measures of inflation expectations. Section IV focuses on the issue of measurement errors in expectations and the econometric problems involved. Section V reports the results of estimation of alternative models of inflation expectations, and investigates the quantitative impact of government policy and general economic conditions on inflation

The inflation expectations of U.S. firms: Evidence from a new survey

The aim of the presented study was to investigate whether common myths about suicide still prevail, what people in general think are the most common causes for suicide, whether suicide can be prevented, and if so, how. How subjects perceived their participation in a study on attitudes towards suicidal behavior, was also investigated. The Attitudes Towards Suicide questionnaire was sent to a random sample of 1,000 Norwegians. The data were analyzed both quantitatively and qualitatively. The results showed that the common myths still prevail, that people in general mainly assign intrapersonal causes to suicide, with the belief that suicide can be prevented, and that they perceived their participation in the study positively. The value of the general public in suicide prevention and the need for increased openness and competence building were emphasized.

Ensuring drug safety among the patients is the main domain of pharmacovigilance activities worldwide. A pharmacovigilance system was established in the United Arab Emirates (UAE) in 2008. Research evidence reflects that the current system is lacking in active participation from patients, and also, the inadequate role of healthcare professionals is anticipated. In this context, it is pertinent to know the general public’s understandings and their patterns of safe use of medication, which are unexplored areas in Dubai, UAE. The current study aimed to explore the public views, attitudes, and experiences toward medication safety, and to explore key factors enhancing the safe use of medications among the public in Dubai. This study adopted a qualitative approach and face-to-face, 14 in-depth interviews with public individuals, selected purposively using the snowball sampling technique. The interviews were conducted in different places in Dubai recorded and transcribed verbatim and thematically analyzed for data analysis. Reporting of adverse drug reaction was not well-known among all the participants. Public views towards safe use of medicines were limited to the side effects of the consumed medicines only, and to a lesser extent to the inappropriate indication and dosage. Most of the participants mentioned that gaining knowledge about the side effects of the prescribed drug was the main reason for reading the patient information leaflet. Quite a few participants have experienced side effects while consuming their medicines and they were unsure of how to deal with the situation. The current research also reflected the lack of proper communication between pharmacists and physicians in managing drug safety issues. Conclusively, the current research revealed gaps in public views regarding medication’s safety, which consequently may impact their attitudes during the course of medication use. Efforts need to be strengthened to enhance positive views and attitudes of the public towards medication safety and ADR reporting in the UAE.

In order to create an environment of low and stable inflation in Mexico it has been necessary to generate a framework for the conduction of monetary policy focused on price stability along with fiscal discipline. This paper describes some structural achievements to control inflation that have been attained in Mexico. In addition, it shows empirical evidence in favor of the anchoring of inflation expectations, particularly those for the medium and long term, being recently strengthened. Considering three episodes, within the period 2004-2012, in which inflation was subject to different supply shocks, it finds that during the episode in 2012 inflation expectations showed greater stability. Results show that the response from inflation expectations to supply shocks has diminished over time, up to values that are not significantly different from zero. This suggests a strengthening of the credibility of the Bank of Mexico's commitment to price stability.

We study how firms’ price expectations and decisions are affected by carbon pricing, using a survey of French manufacturing firms. Exogenous variations in the price of carbon are obtained by high-frequency identification. A change in carbon price increases firms’ inflation expectations as well as their own expected and realized price growth. Initially, positive forecast errors emerge, but over time, the impact on price expectations proves to be more enduring than on actual price growth, leading to negative forecast errors in the medium- to long-run. Furthermore, our analysis reveals that firms’ responses to these carbon pricing shocks exhibit considerable heterogeneity. Low energy-intensive firms are worse at forecasting the effects of the shock on the evolution of their own prices and firms with narrower profit margins are less able to pass through the increase in energy costs to the prices of their final products. These findings align with models of information rigidities, shedding new light on how firms navigate and adapt to carbon pricing policies.

We assess whether central banks may use inflation expectations as a policy tool for stabilization purposes. We review recent work on how expectations of agents are formed and how they affect their economic decisions. Empirical evidence suggests that inflation expectations of households and firms affect their actions but the underlying mechanisms remain unclear, especially for firms. Two additional limitations prevent policy-makers from being able to actively manage inflation expectations. First, available surveys of firms’ expectations are systematically deficient, which can only be addressed through the creation of large, nationally representative surveys of firms. Second, neither households’ nor firms’ expectations respond much to monetary policy announcements in low-inflation environments. We provide suggestions for how monetary policy-makers can pierce this veil of inattention through new communication strategies. At this stage, there remain a number of implementation issues and open research questions that need to be addressed to enable central banks to use inflation expectations as a policy tool.

This study investigates gender disparities in inflation expectations in India using data from the Reserve Bank of India’s Households’ Inflation Expectations Survey (March 2011 to September 2022). To determine these differences, the authors analyze the expectations of future prices for various categories including food products, nonfood products, household durables, housing, and general prices for both a short-term horizon (the next three months) and a long-term horizon (one year ahead). The authors employ independent sample t test, ordinary least square (OLS) regression, and ordinal logistic regression (OLOGIT) models to assess the average inflation expectations disparities between genders. The results demonstrate a significant relationship between gender and inflation expectations, with the findings indicating that, on average, females exhibit higher inflation expectations compared to males.

Purpose This paper aims to analyze how economic policy uncertainty (EPU) affects inflation expectations. The study uses unit-level observations of 3 months ahead and 1-year ahead inflation expectations from the Reserve Bank of India’s Inflation Expectations Household Survey (IESH) to explore the variations in consumer confidence across several cities in India. Design/methodology/approach This paper uses unit-level observations of 3 months ahead and 1 year-ahead inflation expectations of the households from the Reserve Bank of India’s IEHS between September 2008 to July 2024. It uses a fixed effects regression exercise to examine the impact of EPU on the households’ inflation expectations. Findings The study results show that EPU negatively and significantly impacts consumers’ short-term inflation expectations. Heterogenous analysis concerning gender reveals that impact of EPU on inflation expectations is higher for women than men. Further, respondents in the working-age population and greater income uncertainty are more sensitive to changes in EPU on inflation expectations. A disaggregated analysis is also conducted to analyze the impact of EPU on several disaggregated indicators of inflation expectations, showing that EPU has a larger impact on durables and house prices compared to nondurables and services. Robustness tests with alternative policy uncertainty measures and placebo tests corroborate our findings. Practical implications These findings indicate that EPU can potentially depress the household’s own price expectations related to several components of their consumption basket due to precautionary saving behavior, consequently leading to a pessimistic view of overall prices. Originality/value To the best of our knowledge, no study has explored the impact of inflation policy uncertainty on inflation expectations using unit-level survey data for an emerging economy like India. Furthermore, survey-level data allows us to examine the heterogenous impact of EPU based on household characteristics. Moreover, it also establishes the household’s own consumption basket channel through which EPU impacts the overall inflation expectations.

Last week, we witnessed one of the most exciting developments in monetary policymaking since the 1930s. The Japanese central bank staged an honest-to-goodness regime shift. The Bank of Japan went beyond vague promises and cheap talk. As I will describe in more detail later, it took dramatic actions and pledged convincingly to do whatever it takes to end deflation in Japan. The theoretical reasons why this regime shift may be important are well understood by economists. Persistent deflation and anemic growth suggest that Japan continues to suffer from a shortfall of demand. But their policy interest rate is already at the zero lower bound. Furthermore, riskier, long-term rates are also very low— suggesting that unconventional policies such as large-scale asset purchases are unlikely to do much to further reduce nominal rates. As discussed by Paul Krugman, Gauti Eggertsson and Michael Woodford, and others, if unconventional monetary policy can raise expected inflation, this can push down real interest rates even though nominal rates cannot fall. 1 This, in turn, can raise aggregate demand by stimulating interest

This paper investigates whether Italian households’ actual expenditure and willingness to buy durables (cars) are related to their inflation expectations. In a high-inflation regime, as in the early 1990s, consumers with higher inflation expectations tend to have higher current than future expenditure, suggesting that an inter-temporal substitution mechanism is at work. Conversely, in a low-inflation environment, such as the one after the global financial crisis, higher expected inflation lowers households’ purchasing power and, thereby, spending (income effect). We also find that the composition of household balance sheets matters for explaining how inflation expectations shape spending behaviour.