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Consumers' Attitudes and Their Inflation Expectations

Author

Listed:
  • Michael Ehrmann

    (European Central Bank)

  • Damjan Pfajfar

    (Federal Reserve Board)

  • Emiliano Santoro

    (University of Copenhagen)

Abstract

This paper studies consumers’ inflation expectations using micro-level data from the University of Michigan’s Surveys of Consumers. It shows that beyond the well-established socioeconomic factors such as income, age, or gender, inflation expectations are also related to respondents’ financial situation, their purchasing attitudes, and their expectations about the macroeconomy. Respondents with current or expected financial difficulties and those with pessimistic attitudes about major purchases, income developments, or unemployment have a stronger upward bias than other households. However, their bias shrinks by more than that of the average household in response to increasing media reporting about inflation.

Suggested Citation

  • Michael Ehrmann & Damjan Pfajfar & Emiliano Santoro, 2017. "Consumers' Attitudes and Their Inflation Expectations," International Journal of Central Banking, International Journal of Central Banking, vol. 13(1), pages 225-259, February.
  • Handle: RePEc:ijc:ijcjou:y:2017:q:0:a:6
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    References listed on IDEAS

    as
    1. Friedrich, Christian, 2016. "Global inflation dynamics in the post-crisis period: What explains the puzzles?," Economics Letters, Elsevier, vol. 142(C), pages 31-34.
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    7. Michael J. Lamla & Thomas Maag, 2012. "The Role of Media for Inflation Forecast Disagreement of Households and Professional Forecasters," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 44(7), pages 1325-1350, October.
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    17. 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.
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    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
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    Cited by:

    1. David-Jan Jansen & Matthias Neuenkirch, 2017. "News Consumption, Political Preferences, and Accurate Views on Inflation," Research Papers in Economics 2017-03, University of Trier, Department of Economics.
    2. repec:aut:wpaper:201906 is not listed on IDEAS
    3. Berge, Travis J., 2018. "Understanding survey-based inflation expectations," International Journal of Forecasting, Elsevier, vol. 34(4), pages 788-801.
    4. Raïsa Basselier & David de Antonio Liedo & Jana Jonckheere & Geert Langenus, 2018. "Can in?ation expectations in business or consumer surveys improve in?ation forecasts?," Working Paper Research 348, National Bank of Belgium.
    5. repec:eee:ecolet:v:161:y:2017:i:c:p:112-115 is not listed on IDEAS
    6. Ioana A. Duca & Geoff Kenny & Andreas Reuter, 2019. "Inflation Expectations, Consumption and the Lower Bound: Micro Evidence from a Large Euro Area Survey," European Economy - Discussion Papers 2015 - 092, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    7. Pattanaik, Sitikantha & Muduli, Silu & Ray, Soumyajit, 2019. "Inflation Expectations of Households: Do They Influence Wage-Price Dynamics in India?," EconStor Preprints 193462, ZBW - Leibniz Information Centre for Economics.
    8. Duca, Ioana A. & Kenny, Geoff & Reuter, Andreas, 2018. "Inflation expectations, consumption and the lower bound: micro evidence from a large euro area survey," Working Paper Series 2196, European Central Bank.

    More about this item

    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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