Economic literacy and inflation expectations: evidence from a laboratory experiment
AbstractWe present new experimental evidence on heterogeneity in the formation of inflation expectations and relate the variation to economic literacy and demographics. The experimental design allows us to investigate two channels through which expectations-formation may vary across individuals: (1) the choice of information and (2) the use of given information. Subjects who are more economically literate perform better along both dimensions—they choose more-relevant information and make better use of given information. Compared with survey data on inflation expectations, fewer demographic factors are associated with variation in inflation expectations, and economic literacy in most cases accounts for demographic variation in expectations.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Federal Reserve Bank of Boston in its series Public Policy Discussion Paper with number 11-8.
Date of creation: 2011
Date of revision:
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-12-19 (All new papers)
- NEP-CBE-2011-12-19 (Cognitive & Behavioural Economics)
- NEP-EXP-2011-12-19 (Experimental Economics)
- NEP-MAC-2011-12-19 (Macroeconomics)
- NEP-MON-2011-12-19 (Monetary Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Maarten vanRooij & Annamaria Lusardi & Rob Alessie, 2007.
"Financial Literacy and Stock Market Participation,"
wp162, University of Michigan, Michigan Retirement Research Center.
- Maarten van Rooij & Annamaria Lusardi & Rob Alessie, 2007. "Financial Literacy and Stock Market Participation," NBER Working Papers 13565, National Bureau of Economic Research, Inc.
- Maarten van Rooij & Annamaria Lusardi & Rob Alessie, 2007. "Financial Literacy and Stock Market Participation," CeRP Working Papers 66, Center for Research on Pensions and Welfare Policies, Turin (Italy).
- van Rooij, Maarten & Lusardi, Annamaria & Alessie, Rob J. M., 2007. "Financial literacy and stock market participation," CFS Working Paper Series 2007/27, Center for Financial Studies (CFS).
- Maarten van Rooij & Annamaria Lusardi & Rob Alessi, 2007. "Financial literacy and stock market participation," DNB Working Papers 146, Netherlands Central Bank, Research Department.
- M.C.J. van Rooij & Annamaria Lusardi & R. Alessie, 2007. "Financial Literacy and Stock Market Participation," Working Papers 07-23, Utrecht School of Economics.
- Marimon, R. & Sunder, S., 1995.
"Does a Constant Money Growth Rule Help Stabilize Inflation?: Experimental Evidence,"
GSIA Working Papers
1995-04, Carnegie Mellon University, Tepper School of Business.
- Marimon, Ramon & Sunder, Shyam, 1995. "Does a constant money growth rule help stabilize inflation?: experimental evidence," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 43(1), pages 111-156, December.
- Christopher D. Carroll, 2003.
"Macroeconomic Expectations Of Households And Professional Forecasters,"
The Quarterly Journal of Economics,
MIT Press, vol. 118(1), pages 269-298, February.
- Christopher D Carroll, 2002. "Macroeconomic Expectations of Households and Professional Forecasters," Economics Working Paper Archive 477, The Johns Hopkins University,Department of Economics.
- Christopher Carroll, 2003. "RATS code for Macroeconomic Expectations Of Households And Professional Forecasters," QM&RBC Codes 36, Quantitative Macroeconomics & Real Business Cycles.
- Jonung, Lars, 1981. "Perceived and Expected Rates of Inflation in Sweden," American Economic Review, American Economic Association, vol. 71(5), pages 961-68, December.
- Dwyer, Gerald P, Jr, et al, 1993.
"Tests of Rational Expectations in a Stark Setting,"
Royal Economic Society, vol. 103(418), pages 586-601, May.
- Bergmann, Barbara R., 1988. "An experiment on the formation of expectations," Journal of Economic Behavior & Organization, Elsevier, vol. 9(2), pages 137-151, March.
- Adam, Klaus, 2005.
"Experimental Evidence on the Persistence of Output and Inflation,"
CEPR Discussion Papers
4885, C.E.P.R. Discussion Papers.
- Klaus Adam, 2007. "Experimental Evidence on the Persistence of Output and Inflation," Economic Journal, Royal Economic Society, vol. 117(520), pages 603-636, 04.
- Adam, Klaus, 2005. "Experimental evidence on the persistence of output and inflation," Working Paper Series 0492, European Central Bank.
- Olivier Armantier & Wändi Bruine de Bruin & Giorgio Topa & Wilbert van der Klaauw & Basit Zafar, 2011.
"Inflation expectations and behavior: Do survey respondents act on their beliefs?,"
509, Federal Reserve Bank of New York.
- Wilbert van der Klaauw & Wandi Bruine de Bruin & Giorgio Topa & Basit Zafar & Olivier Armantier, 2012. "Inflation Expectations and Behavior: Do Survey Respondents Act on their Beliefs?," 2012 Meeting Papers 121, Society for Economic Dynamics.
- Pfajfar, D. & Santoro, E., 2008. "Asymmetries in Inflation Expectation Formation Across Demographic Groups," Cambridge Working Papers in Economics 0824, Faculty of Economics, University of Cambridge.
- Hey, John D., 1994. "Expectations formation: Rational or adaptive or ...?," Journal of Economic Behavior & Organization, Elsevier, vol. 25(3), pages 329-349, December.
- Pfajfar, D., 2012.
"Formation of Rationally Heterogeneous Expectations,"
2012-083, Tilburg University, Center for Economic Research.
- Pfajfar, Damjan, 2013. "Formation of rationally heterogeneous expectations," Journal of Economic Dynamics and Control, Elsevier, vol. 37(8), pages 1434-1452.
- Michael J. Lamla & Lena Dräger & Damjan Pfajfar, 2013.
"Are Consumer Expectations Theory-Consistent? The Role of Macroeconomic Determinants and Central Bank Communication,"
KOF Working papers
13-345, KOF Swiss Economic Institute, ETH Zurich.
- Dräger, L. & Lamla, M.J. & Pfajfar, D., 2013. "Are Consumer Expectations Theory-Consistent? The Role of Macroeconomic Determinants and Central Bank Communication," Discussion Paper 2013-063, Tilburg University, Center for Economic Research.
- Menz, Jan-Oliver & Poppitz, Philipp, 2013. "Households' disagreement on inflation expectations and socioeconomic media exposure in Germany," Discussion Papers 27/2013, Deutsche Bundesbank, Research Centre.
- Xu, Lisa & Zia, Bilal, 2012. "Financial literacy around the world : an overview of the evidence with practical suggestions for the way forward," Policy Research Working Paper Series 6107, The World Bank.
- Lena Dräger & Ulrich Fritsche, 2013. "Don't Worry, Be Right! Survey Wording Effects on In flation Perceptions and Expectations," Macroeconomics and Finance Series 201308, Hamburg University, Department Wirtschaft und Politik.
- Thomas A. Garrett, 2011. "A Federal Reserve System conference on research in applied microeconomics," Review, Federal Reserve Bank of St. Louis, issue Nov, pages 455-462.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Catherine Spozio).
If references are entirely missing, you can add them using this form.