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Heterogeneity in Euro Area Consumers’ Inflation Expectations: Some Stylized Facts and Implications



Aggregate measures of inflation expectations mask heterogeneity among consumers. According to the theoretical and empirical literature, expectations may differ due to different information sets and “models” used by individuals. European Commission Consumer Survey data confirm considerable heterogeneity in inflation expectations over time, across countries and across demographic groups. Consistent with findings according to which financial literacy is an important determinant of inflation expectations heterogeneity, our econometric estimates show that education and income seem to play a more important role than age and gender. However, their effect on heterogeneity is nonlinear. We also find evidence of strong country-specific idiosyncrasies in the formation of inflation expectations. Overall, while showing some common tendencies, inflation expectations in the euro area continue to vary across countries and demographic groups as regards their level, driving factors and evolution over time. Employing “targeted” or “multi-tiered” communication strategies for different demographic groups and within the various euro area countries might indeed help “focus,” or “anchor,” inflation expectations around a level in line with the Eurosystem’s definition of price stability.

Suggested Citation

  • Ernest Gnan & Johannes Langthaler & Maria Teresa Valderrama, 2011. "Heterogeneity in Euro Area Consumers’ Inflation Expectations: Some Stylized Facts and Implications," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue 2, pages 43-66.
  • Handle: RePEc:onb:oenbmp:y:2011:i:2:b:3

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    References listed on IDEAS

    1. Bruine de Bruin, Wändi & van der Klaauw, Wilbert & Topa, Giorgio, 2011. "Expectations of inflation: The biasing effect of thoughts about specific prices," Journal of Economic Psychology, Elsevier, vol. 32(5), pages 834-845.
    2. Wändi Bruine de Bruin & Michael F. Bryan & Simon M. Potter & Giorgio Topa & Wilbert Van der Klaauw, 2008. "Rethinking the measurement of household inflation expectations: preliminary findings," Staff Reports 359, Federal Reserve Bank of New York.
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    Cited by:

    1. Menz, Jan-Oliver & Poppitz, Philipp, 2013. "Households' disagreement on inflation expectations and socioeconomic media exposure in Germany," Discussion Papers 27/2013, Deutsche Bundesbank.
    2. Deversi, Marvin, 2014. "Do Macroeconomic Shocks Affect Intuitive Inflation Forecasting? An Experimental Investigation," Ruhr Economic Papers 528, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    3. Jan Acedanski & Julia Wlodarczyk, 2016. "Dispersion Of Inflation Expectations In The European Union During The Global Financial Crisis," Equilibrium. Quarterly Journal of Economics and Economic Policy, Institute of Economic Research, vol. 11(4), pages 737-749, December.
    4. Acedański, Jan, 2017. "Heterogeneous expectations and the distribution of wealth," Journal of Macroeconomics, Elsevier, vol. 53(C), pages 162-175.

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    More about this item


    inflation expectations; heterogeneity; communication policies;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness


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