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A naïve sticky information model of households' inflation expectations

  • Lanne, Markku
  • Luoma, Arto
  • Luoto, Jani

This paper shows that the Michigan survey data on inflation expectations is consistent with a simple sticky information model where a significant proportion of households base their inflation expectations on the past release of actual inflation rather than the rational forward-looking forecast. In particular, the model can explain both the mean and cross-sectional distribution of households' inflation expectations.

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File URL: http://www.sciencedirect.com/science/article/B6V85-4VK6N5T-2/2/575f3a90671d8c40cb84fed84b72806b
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Article provided by Elsevier in its journal Journal of Economic Dynamics and Control.

Volume (Year): 33 (2009)
Issue (Month): 6 (June)
Pages: 1332-1344

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Handle: RePEc:eee:dyncon:v:33:y:2009:i:6:p:1332-1344
Contact details of provider: Web page: http://www.elsevier.com/locate/jedc

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