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Households Forming Inflation Expectations: Active and Passive Absorption Rates

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  • Easaw Joshy

    ()
    (Swansea University)

  • Golinelli Roberto

    ()
    (University of Bologna)

Abstract

Recent research has established that households “absorb” from professional forecasters as they form their inflation expectations. Professionals’ forecasts are transmitted, or “absorbed,” throughout the population slowly but eventually. This provides the microfoundations for “sticky information” expectations. Using a unique survey-based dataset for the UK that distinguishes between professional and non-professional forecasts and where the former is further categorize by occupations, the present paper attempts to identify the professional forecaster. The paper also considers whether absorption rates take place heterogeneously amongst the “absorbing” agents. We identify “active” and “passive” absorbers amongst the agents and they are distinguished by their respective absorption rates. The present analyses also consider whether these absorption rates are non-linear.

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Bibliographic Info

Article provided by De Gruyter in its journal The B.E. Journal of Macroeconomics.

Volume (Year): 10 (2010)
Issue (Month): 1 (November)
Pages: 1-32

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Handle: RePEc:bpj:bejmac:v:10:y:2010:i:1:n:35

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References

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Cited by:
  1. Timo Henckel & Gordon Menzies & Daniel J. Zizzo, 2013. "The Great Recession and the Two Dimensions of European Central Bank Credibility," Working Paper Series 13, Economics Discipline Group, UTS Business School, University of Technology, Sydney.
  2. Lena Dräger, 2011. "Endogenous Persistence with Recursive Inattentiveness," KOF Working papers 11-285, KOF Swiss Economic Institute, ETH Zurich.
  3. J. Easaw & R. Golinelli & M. Malgarini, 2012. "Do Households Anchor their Inflation Expectations? Theory and Evidence from a Household Survey," Working Papers wp842, Dipartimento Scienze Economiche, Universita' di Bologna.
  4. J. Easaw & R. Golinelli, 2012. "Household Inflation Expectations: Information Gathering, Inattentive or ‘Stubborn’?," Working Papers wp853, Dipartimento Scienze Economiche, Universita' di Bologna.
  5. Guimarães, Rodrigo, 2014. "Expectations, risk premia and information spanning in dynamic term structure model estimation," Bank of England working papers 489, Bank of England.

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