Abstract
We study the formation of Chinese consumers’ gas price and inflation expectations using a newly-conducted survey of 2,500 Chinese households. Respondents provided their priors about recent and future gas price inflation. Participants were randomly exposed to information about recent gas price inflation, and some were primed to think about the 2022 Ukraine war. We then re-solicited gas price expectations, and asked respondents about their spending plans and for open-ended explanations of their responses. Both information treatments increased respondents’ gas price inflation expectations by about 3 percentage points. We use textual analysis of households’ open-ended responses to study the reasons behind their reported expectations and relationship between beliefs, narratives, and spending plans.
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