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The Formation of Consumer Inflationary Expectations in Australia

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  • L. V. DEFRIS
  • R. A. WILLIAMS

Abstract

This paper analyzes the quantitative price expectations of consumers as obtained from consumer surveys. Price expectations are considered as functions of (i) past rates of inflation (ii) other economic variables, and (iii) consumer sentiment variables. The dominant influence on expectations is the most recent change in the consumer price index. Wage‐indexation decisions and changes in the money supply also exert a significant influence on mean expectations. The variability of price expectations across consumers is proportional to the mean level of expectations.

Suggested Citation

  • L. V. Defris & R. A. Williams, 1979. "The Formation of Consumer Inflationary Expectations in Australia," The Economic Record, The Economic Society of Australia, vol. 55(2), pages 136-148, June.
    • Handle: RePEc:bla:ecorec:v:55:y:1979:i:2:p:136-148
    DOI: 10.1111/j.1475-4932.1979.tb02213.x
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    References listed on IDEAS

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    1. F. Thomas Juster & Paul Wachtel, 1972. "Inflation and the Consumer," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 3(1), pages 71-122.
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    Cited by:

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    2. Chris M. Alaouze, 2003. "A modified logit model for time series with an application to the pricing behaviour of manufacturing firms in Australia," Empirical Economics, Springer, vol. 28(3), pages 599-613, July.
    3. Peter Saunders, 1981. "The Formation of Producers' Price Expectations in Australia," The Economic Record, The Economic Society of Australia, vol. 57(4), pages 368-378, December.
    4. Yuxiang, Karl & Chen, Zhongchang, 2010. "Monetary policy credibility and inflationary expectation," Journal of Economic Psychology, Elsevier, vol. 31(4), pages 487-497, August.
    5. Jocelyn Horne, 1981. "Rational Expectations and the Defris‐Williams Inflationary Expectations Series," The Economic Record, The Economic Society of Australia, vol. 57(3), pages 261-268, September.
    6. Sam Ouliaris, 1981. "Household Saving and The Rate of Interest," The Economic Record, The Economic Society of Australia, vol. 57(3), pages 205-214, September.
    7. Gärling, Tommy & Gamble, Amelie & Christandl, Fabian, 2013. "Income increases do not compensate for perceived inflation—A price-consumption anomaly," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 47(C), pages 11-15.

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