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Public Information and Inflation Expectations: Microeconometric Evidence from a Natural Experiment

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Author Info

  • Paul E. Carrillo

    (George Washington University)

  • M. Shahe Emran

    (Columbia University)

Abstract

Governments provide public information to reduce information imperfections. Do households rely on public signals to inform themselves about market conditions? To identify the importance of public information in households' price expectations, we take advantage of a unique natural experiment in Ecuador where the published inflation rate had been different from the correct rate over a period of fourteen months due to a software error. We find that the public signal about prices plays an important role in households' price expectations, and the change in price expectations affects their savings choices. The effect is stronger for better-educated and older people. © 2012 The President and Fellows of Harvard College and the Massachusetts Institute of Technology.

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Bibliographic Info

Article provided by MIT Press in its journal Review of Economics and Statistics.

Volume (Year): 94 (2012)
Issue (Month): 4 (November)
Pages: 860-877

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Handle: RePEc:tpr:restat:v:94:y:2012:i:4:p:860-877

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Web page: http://mitpress.mit.edu/journals/

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Web: http://mitpress.mit.edu/journal-home.tcl?issn=00346535

Related research

Keywords: public information; price expectations; developing countries; natural experiment; heterogeneity; Ecuador;

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