Household Expectations Research Articles

Critical illness insurance and household consumption: evidence from rural China

ABSTRACT This paper explores the impact of the critical illness insurance (CII) on rural household consumption. We use data from the 2011–2018 China Health and Retirement Longitudinal Study (CHARLS), which covers 28 provinces, and apply a staggered difference-in-differences method to evaluate the effects of the CII over the entire policy period. This approach can provide nationally representative findings and address the limitations of previous studies. Our results indicate that the CII increases rural household consumption by approximately 8.5%. This effect is primarily driven by improved household expectations regarding reduced future medical expenses. Consequently, precautionary savings decrease, increasing consumption. The heterogeneity analysis reveals that the consumption-promoting effect of the CII is more pronounced in eastern regions and among middle-income rural households. These findings contribute to the literature by providing empirical evidence on the mechanisms and regional variations of the CII’s impact. They also offer policy implications for countries aiming to expand the CII coverage and enhance household consumption.

Determinants of Household and Professional Forecasters’ Inflation Expectations in India

ABSTRACTThis study analyses and compares the determinants of inflation expectations among households and professional forecasters in India. To this end, we utilize quarterly survey data from the Reserve Bank of India (RBI), specifically the Inflation Expectations Survey of Households (IESH) and the Professional Forecasters’ Survey (SPF). The analysis employs a non‐recursive structural vector autoregressive (SVAR) model to explore the relationships between variables. The impulse response function and variance decomposition analysis shed light on the response of inflation expectations to macroeconomic shocks. Our findings indicate that apart from conventional macroeconomic factors like realized inflation and monetary policy, exogenous factors such as oil prices significantly shape inflation expectations. Comparing IESH and SPF, we found out that household expectations are more sensitive to shocks related to food prices, reflecting the influence of food expenses on household decision‐making. Conversely, professional forecasters’ expectations are more influenced by core inflation. Finally, we observed that inflation expectations adjust more quickly than realized inflation in response to macroeconomic shocks, suggesting a leading role. This study is novel with the contribution to the existing literature as it provides a comparative analysis of determinants of inflation expectations between households and professional forecasters in India, while also considering inflation targeting as a significant factor.

How workable is a 20-minute city in Australia? Re-examining the challenge of change in spatial labour and job relations

ABSTRACT Most x-minute city studies focus on liveability and neighborhood accessibility to local services, but rarely include primary employment. This paper complements these studies by examining the urban employment structure and transport dynamics of an Australian city under the 20-minute city concept framework. To do this, we develop a comprehensive method to model residents’ job access time using census-based journey to work (JTW) data and detailed household activity and travel survey. Analysing JTW time stepping down to diverse industry and employment categories and transport modes allows new insight into the disparity in residents’ job and housing locations and transport choices at local scales. By evaluating the distribution of working residents, types of employment, and transport performance, this paper examines possible policy responses and challenges of change in expanding the 20-minute planning target for employment. The analysis suggests that housing infill development could support reduced JTW time for residents experiencing longer time for work travels. However, this would require active planning of both land-use mix and dwelling design to meet prevalent household expectations about dwelling size and quality.

Quantifying qualitative survey data with panel data

We develop a novel methodology to quantify forecasts based on qualitative survey data. The methodology is generally applicable when quantitative information is available on the realization of the forecasted variable, for example from firm balance sheets. The method can be applied to a wide range of panel datasets, including qualitative surveys on firm-level forecasts or household expectations. As an application, we employ a panel of Greek manufacturing firms and quantify firms' forecast errors of own sales growth. In this context, we conduct a variety of exercises to demonstrate the methodology's validity and accuracy.

Effects of monetary policy on household expectations: The role of homeownership

We study the role of homeownership in the effectiveness of monetary policy on households’ expectations based on individual-level microdata in the U.S. We find that homeowners lower their near-term inflation expectations and optimism about the labor market outlook in response to a rise in mortgage rates, while renters are less likely to do so. We further show that forward guidance shocks lead to similar differences between homeowners and renters. Our results suggest that homeowners pay attention to news on interest rates and adjust their expectations accordingly in a manner consistent with the intended effect of monetary policy. We characterize this empirical finding with a rational inattention model where mortgage payments create an incentive for homeowners to acquire information on monetary policy, unlike renters. This housing-driven endogenous attentiveness is the key mechanism behind the compelling empirical link among homeownership, attention, and the transmission of monetary policy.

Household Consumption and Dispersed Information

By introducing an information friction to a heterogeneous agent model, we are able to explain two patterns of small economies experiencing large income changes: (1) excess volatility in consumption and (2) household consumption elasticities that have low correlation with income. With a standard dispersed information structure, households cannot distinguish aggregate income shocks from idiosyncratic ones. Their consumption responds excessively to aggregate shocks, which they incorrectly forecast to be too persistent. This effect occurs homogeneously across the income distribution, lowering the correlation of the consumption elasticity with income. We corroborate our central mechanism using survey data on household expectations of their future earnings.

Consumption categories, household attention, and inflation expectations: Implications for optimal monetary policy

What inflation measure should central banks target? This paper highlights a mechanism where monetary policy optimally targets headline inflation if households pay limited attention to different consumption categories when forming inflation expectations. This result stands in contrast to standard rational expectations models, where optimal policy targets core inflation. The core inflation rate excludes volatile energy and food prices (non-core) from headline inflation. Using novel survey data on inflation expectations for disaggregated consumption categories, I find household expectations are disproportionately driven by beliefs about future non-core prices. A model of bounded rationality accounts for the empirical evidence. While forming inflation expectations, households pay more attention to the volatile non-core components. Embedding this framework into a multi-sector New Keynesian model, I show that targeting headline rather than core inflation provides welfare gains.

The Impact of Curbing Housing Speculation on Household Entrepreneurship in China

We document a speculation channel and complement the well-documented collateral channels by offering novel evidence about the effect of curbing housing speculation policies We estimate the positive effect of discouraging housing speculation on household entrepreneurship in China. By exploiting the city-level variations in the stringency of home purchase restrictions between 2011 and 2019 and five waves of China Household Finance Survey (CHFS) data, we find that discouraging housing speculation significantly increases the likelihood of local households starting a business. To address endogeneity concerns, we exploit plausibly exogenous variation using IV estimations and DID research design. The positive effect is stronger for local multiple-home owners, homeowners without mortgage debt, households with previous entrepreneurial experience, households of risk-loving, and households with large assets. This conclusion is robust with city-level evidence. In the mechanism discussion, we find that discouraging housing speculation significantly reduces the likelihood and the plans of local households to purchase new homes and lowers the house price expectations of local households (thus the opportunity cost of starting a business). We also provide evidence supporting the view that discouraging housing speculation increases entrepreneurial opportunities, innovative development, and local households’ social network investments, all of which contribute to starting a business. The results imply that policies to curb housing speculation can lead to beneficial spillover on entrepreneurship and the local economy, as well as contribute to the sustainability of economic growth.

Financial literacy and inflation expectations of households

In this article we investigate whether this heterogeneity is related to differences in the level of financial literacy of households. Using microdata from surveys on inflation expectations of Kazakhstani households, we constructed an indicator of "financial literacy". According to the results, this indicator helps to explain the level of inflation expectations: respondents with a relatively higher level of financial literacy tend to have relatively lower and more accurate inflation expectations.

The Effect of Inflation Uncertainty on Household Expectations and Spending

The Effect of Inflation Uncertainty on Household Expectations and Spending

Visible Prices and Their Influence on Inflation Expectations of Rus-sian Households

Visible Prices and Their Influence on Inflation Expectations of Rus-sian Households

Do Household Expectations Help Predict Inflation?

Do Household Expectations Help Predict Inflation?

Analysis of community food consumption patterns in the stunting locus area, Dondo District, Tolitoli Regency, Central Sulawesi

Improved diet is one of the factors that need attention in preventing stunting. This is because food is a source of energy for the human body, where consuming good, nutritious and sufficient food intake will improve the quality of the body’s health. The research objective was to analyze household consumption patterns in stunting locus areas. The research location was deliberately chosen in Tolitoli Regency with the consideration that, one of the 320 districts in Indonesia, it is included in the locus of handling problems of toddler growth and development disorders due to nutritional intake or stunting. Dondo sub-district was chosen as the locus of stunting sub-district with the highest stunting prevalence rate in Tolitoli district and 130 sample respondents were obtained using a probability technique that is proportional to the size of the cluster. Data analysis used household food consumption and household consumption patterns. The results obtained by respondents were in the food insecure category in terms of energy adequacy absorption and it was known that the food pattern of household expectations in terms of food consumption did not vary.

Financial concerns and the marginal propensity to consume in COVID times: Evidence from UK survey data

We study how household concerns about their future financial situation may affect the marginal propensity to consume (MPC) during the COVID-19 pandemic. We use a representative survey of UK households to compute the MPC from a hypothetical transfer of £500. We find that household expectations play a key role in determining differences in MPCs across households: households that are concerned about not being able to make ends meet have a 20% higher MPC than other households. Our findings suggest that policies targeted at vulnerable and financially distressed households may prove more effective in stimulating demand than providing stimulus payments to all households.

Social acceptability and household expectations of green sanitation systems

Large-scale, centralised sanitation systems provide safe, reliable, affordable and dignified sanitation to those located within the waterborne sewerage network. However, publicly managed hydro-modernist sanitation systems are not available to all, with many households and communities across the world having to access basic off-grid, state-provided sanitation services, such as pit latrines or Urine Diversion Dehydration Toilets, or having to provide their own solutions to sanitation waste. Urban green sanitation, which is non-sewered and off-grid, represents a new form of hydro-social and socio-technical relations. It aims to address sanitation backlogs and provide an alternative to centralised sanitation systems using ecological circularity. This paper categorises the social acceptability of urban green sanitation technologies into four main dimensions: social concerns, environmental concerns, the right to sanitation, and making a contribution to change. It draws on social assessments undertaken between 2016 and 2023, for the testing of sanitation technologies in Durban, South Africa, as part of the Engineering Field Testing Platform funded by the Bill and Melinda Gates Foundation’s Reinvent the Toilet Challenge and the Water Research Commission, South Africa, to reflect on the social dimensions of urban green sanitation. It argues that transdisciplinary research approaches and the co-production of knowledge are essential in understanding the social acceptability of green sanitation.

Pastoral Differentiations’ Effects on Willingness to Accept Valuation for Grassland Eco-Subsidy—Empirical Study of 410 Herder Households in Grass–Livestock Balance Sub-Policy Zones in Inner Mongolia, China

China’s Grassland Eco-Subsidy Program has been implemented since 2011 to protect and sustain grassland resources and improve the economic situation of herders. In this case study, we aimed to evaluate the policy from the perspective of pastoral differentiations and their willingness to accept (WTA) the eco-subsidy. Using the contingent valuation method (CVM), we interviewed 410 herder households in the grass–livestock balance sub-policy zones across Inner Mongolia, and examined how their horizontal and vertical differentiation affected their WTA and compensation expectations in a sorted Logistic model and a Tobit model, respectively. Our findings suggest that horizontal differentiation of herders (variations of income sources and employment) promoted the WTA for the eco-subsidy and inhibited the increase in compensation expectations. A large vertical differentiation extent (income disparity) lowered the WTA but raised expectations for payment levels. Additionally, factors such as operating pasture area, precipitation, and supervision intensity had significant impacts. Grazing income remained the primary income source for most herder households, reflecting the characteristics of “the rational economic man”. Our results suggest a need for policy improvements to guide herders towards becoming “rational ecological men”. By considering this differentiation, policy makers can better tailor the program to meet the needs and expectations of diverse herder households.

Accelerating inflation expectations of households in the euro area: sources and macroeconomic spending consequences

ABSTRACT In 2021 and 2022, inflation expectations of households in the euro area rose dramatically. Based on a time-series investigation from 1995 to 2022, I find that inflation expectations are driven by current price developments of three consumption product categories and house prices (which are not included in the consumer price index). About half of the recent rise was fuelled by energy prices, 20% by food prices, over 10% by transportation costs and almost 20% by house prices. On a macro-level, controlling for a standard set of spending determinants, a regression analysis suggests that accelerating inflation expectations in general will slow down growth of area wide real private consumption, but under circumstances of low nominal interest rates helped to cushion the negative shock of the covid pandemic and the energy crisis.

Average Inflation Targeting and Household Expectations

Previous article FreeAverage Inflation Targeting and Household ExpectationsOlivier Coibion, Yuriy Gorodnichenko, Edward Knotek, and Raphael SchoenleOlivier Coibion Search for more articles by this author , Yuriy Gorodnichenko Search for more articles by this author , Edward Knotek Search for more articles by this author , and Raphael Schoenle Search for more articles by this author PDFPDF PLUS Add to favoritesDownload CitationTrack CitationsPermissionsReprints Share onFacebookTwitterLinkedInRedditEmail SectionsMoreDetailsFiguresReferencesCited by Just Accepted Article DOIhttps://doi.org/10.1086/722962 Views: 57Total views on this site HistoryAccepted October 11, 2022 PDF download Crossref reports no articles citing this article.

Working of Expectations Channel of Monetary Policy Transmission in India

In this paper, we examine the working of the expectations channel of monetary policy transmission for India, first by investigating the role of inflation expectations in an aggregate supply-demand (AS-AD) adapted to the Indian economy. Second, formulating an inflation function determining convergence of core inflation to its expected value in a fixed point arising through interactions between central bank (CB) expected inflation and expectations of different agents. Finally, we estimate SVARs with variables derived from the above exercises. We first estimate how expectations shocks affect macroeconomic aggregates. Second, we identify the shocks affecting expectations of households and professional forecasters (PFs). In addition, we estimate shocks influencing core inflation. Results suggest the expectation channel worked through interactions between PF forecasts and CB projections, with causality from CB projections to core and from core to household expectations. Supply shocks had short-run effects but core inflation dominated in the longer run. Expectations converged. The expectations channel of transmission to inflation was more effective through communication than through the policy rate, since the rate had low and sometimes even perverse effects. The relatively low impact of demand variables on inflation supports the hypothesized AS-AD structure.

Gas price expectations of Chinese households

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.