Household Inflation Expectations Research Articles

Heterogeneity in Household Inflation Expectations: Policy Implications

Heterogeneity in Household Inflation Expectations: Policy Implications

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.

Household Inflation Expectations: An Overview of Recent Insights for Monetary Policy

Household Inflation Expectations: An Overview of Recent Insights for Monetary Policy

Household Inflation Expectations: An Overview of Recent Insights for Monetary Policy

Household Inflation Expectations: An Overview of Recent Insights for Monetary Policy

Household Inflation Expectations: An Overview of Recent Insights for Monetary Policy

Household Inflation Expectations: An Overview of Recent Insights for Monetary Policy

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

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

Uncertainty of household inflation expectations: Reconciling point and density forecasts

We examine measures of uncertainty of household inflation expectations derived from matched point and density forecasts that are “reconciled”, where the mean (or the median) of the densities are matched to the point forecasts using exponential tilting.

Household Inflation Expectations and Consumer Spending: Evidence from Panel Data

Abstract Recent research offers mixed results concerning the relationship between inflation expectations and consumption, using qualitative measures of readiness to spend. We revisit this question using survey panel data of actual spending from the United States between 2009 and 2012 that also allows us to control for household heterogeneity. We find that durables spending increases with expected inflation only for selected types of households while nondurables spending does not respond to expected inflation. Moreover, spending decreases with expected unemployment. These results imply a limited stimulating effect of inflation expectations on aggregate consumption, which could be reversed if inflation and unemployment expectations move together.

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.

Learning-through-Survey in Inflation Expectations

When surveys rely on repeat participants, this raises the possibility that survey participation may affect future responses, perhaps by prompting information acquisition between survey waves. We show that these “learning-through-survey” effects are large for household inflation expectations. Repeat survey participants generally have lower inflation expectations and uncertainty, particularly if their initial uncertainty was high. Consequently, repeat participants may be more informed about or attentive to inflation. This has important implications: for example, inflation expectations of new participants are more influenced by oil prices, and estimates of the elasticity of intertemporal substitution are lower for new participants. (JEL C83, D84, E31, E37, E58)

An Estimated Model of Household Inflation Expectations: Information Frictions and Implications

Abstract This paper proposes and estimates a dynamic model of household inflation expectations with information frictions and time-varying parameters, where households use a Bayesian learning model to form and update inflation expectations. The model decomposes households' inflation expectation formation process into a learning component, a noisy signal component, and a measurement component. Model-implied household inflation expectations provide a robust fit for the expectation-augmented Phillips curve. As a result of time-varying inflation dynamics, households' attention to inflation is endogenous to its volatility. This insight offers explanations for the anchoring of inflation expectations during the Great Moderation.

Public Debt and Household Inflation Expectations

Public Debt and Household Inflation Expectations

Do Household Inflation Expectations Respond to Macroeconomic Data Releases?

Do Household Inflation Expectations Respond to Macroeconomic Data Releases?

Nonresponse Bias in Household Inflation Expectations Surveys

Nonresponse Bias in Household Inflation Expectations Surveys

Household Inflation Expectations Uncertainty: A Case for Pakistan

This study examines the uncertainty of consumer inf lation expectations in Pakistan using the data collected by the State Bank of Pakistan (SBP) through the Consumer Confidence Survey (CCS). CCS has been conducted every second month since January 2012. The research employs round numbers to calculate inflati on expectation uncertainty and finds it countercyclical and positively correlated with inflation. Further, it also displays a weakly positive correlation with inflation disagreement, inflation volatility, and the Economic Policy Uncertainty (EPU) index. Th e study also reveals that inflation expectation uncertainty is higher for female, less educated, and young respondents compared to businessmen, males, older people, and educated. The study suggests asymmetric behavior of inflation expectations uncertainty for high and low inflation levels, where uncertainty is high when inflation is high. The study also suggests that inflation uncertainty is significantly related to food inflation. Lastly, the study establishes that inflation expectation uncertainty affects the consumption of durable goods by influencing consumer spending attitudes.

Non-Response Bias in Household Inflation Expectations Surveys

Non-Response Bias in Household Inflation Expectations Surveys

Insights on inflation expectations in the Philippines from a household survey

The study contributes to the literature on expectations by providing insights on household expectations from an emerging market and inflation targeting country like the Philippines. Using the results of the Consumer Expectations Survey (CES), a quarterly household survey conducted by the Bangko Sentral ng Pilipinas (BSP), the study is the first to look at the characteristics and determinants of household inflation expectations in the Philippines at a granular level. Results show that survey-based household expectations in the country are not rational. Filipino households exhibit an upward bias in their forecast of future inflation and they tend to rely more on information about past inflation to form their expectations. Nonetheless, in recent years, households have started to incorporate information about future outcomes in their inflation expectations process. To determine the factors that drive household expectations in the Philippines, aggregated (i.e., time series) and disaggregated (i.e., pooled data) data from CES quarterly survey rounds between 2010 and 2020 are used on a standard inflation expectations model. Empirical results point to a significant effect of income conditions, perceptions on economic and financial conditions, the inflation target, and demographic factors (e.g., educational attainment, marital status) on the formation of household expectations in the Philippines. Based on the findings and observations, the study draws insights for central bank communication strategy, particularly in influencing household expectations.

Subjective inflation expectations of households

Subjective inflation expectations of households

Internal consistency of household inflation expectations: Point forecasts vs. density forecasts

We examine the internal consistency of US households’ inflation expectations reported as point and density forecasts by the New York Fed’s Survey of Consumer Expectations. We find that the majority of the households report well-defined histograms, with their central tendencies close to the corresponding point forecasts. We observe higher levels of consistency in forecasts reported by survey respondents with higher levels of income, education, and financial literacy. Furthermore, our results suggest that both the point forecasts directly reported and those derived from the histograms are more accurate when they are from respondents who are more likely to report consistent forecasts. In addition, we find that the consensus derived using only the consistent forecasts is as accurate as the consensus derived using all forecasts.

The impact of rising oil prices on U.S. inflation and inflation expectations in 2020–23

The sustained increase in oil and gasoline prices since mid-2020 has raised fears of persistently high U.S. inflation for years to come and rising inflation expectations, along with concerns about the emergence of a wage-price spiral. Using data through May 2022, we show that these concerns have been overstated. There is no evidence that gasoline price shocks have moved long-run household inflation expectations or that the inflationary effect of gasoline price shocks is persistent. The short-run effects on headline inflation are sizable, but have accounted for only a small fraction of overall inflation. For example, on a year-over-year basis, gasoline price shocks are expected to raise headline PCE inflation by 1.9 percentage points at the end of 2022 and by 0.8 percentage points at the end of 2023, under the assumption that the price of oil remains at $110/barrel after May 2022. In contrast, the impact on core PCE inflation in 2022 and 2023 is only 0.3 percentage points each. These estimates already account for increases in inflation expectations. The peak impact on 1-year household inflation expectations is 0.7 percentage points, while that on 5-year expectations is only 0.15 percentage points.