IDEAS home Printed from https://ideas.repec.org/a/onb/oenbmp/y2011i2b3.html
   My bibliography  Save this article

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

Author

Abstract

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
    as

    Download full text from publisher

    File URL: https://www.oenb.at/dam/jcr:39710ad5-c09d-41d5-a7e6-9f4455ecbe6e/mop_2011_q2_analyse03_gnan_tcm16-235936.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    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.
    Full references (including those not matched with items on IDEAS)

    Citations

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


    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.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Lena Dräger, 2015. "Inflation perceptions and expectations in Sweden – Are media reports the missing link?," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 77(5), pages 681-700, October.
    2. Binder, Carola C., 2017. "Measuring uncertainty based on rounding: New method and application to inflation expectations," Journal of Monetary Economics, Elsevier, vol. 90(C), pages 1-12.
    3. Binder, Carola Conces, 2018. "Inflation expectations and the price at the pump," Journal of Macroeconomics, Elsevier, vol. 58(C), pages 1-18.
    4. Alycia Chin & Wändi Bruin, 2017. "Understanding the Formation of Consumers' Stock Market Expectations," Journal of Consumer Affairs, Wiley Blackwell, vol. 51(1), pages 200-210, March.
    5. Goyal, Ashima & Parab, Prashant, 2021. "What influences aggregate inflation expectations of households in India?," Journal of Asian Economics, Elsevier, vol. 72(C).
    6. Christopher Roth & Johannes Wohlfart, 2020. "How Do Expectations about the Macroeconomy Affect Personal Expectations and Behavior?," The Review of Economics and Statistics, MIT Press, vol. 102(4), pages 731-748, October.
    7. Lena Vogel & Jan-Oliver Menz & Ulrich Fritsche, 2009. "Prospect Theory and Inflation Perceptions - An Empirical Assessment," Macroeconomics and Finance Series 200903, University of Hamburg, Department of Socioeconomics.
    8. Olkhov, Victor, 2019. "Methods of Economic Theory: Variables, Transactions and Expectations as Functions of Risks," MPRA Paper 95628, University Library of Munich, Germany.
    9. Olivier Armantier & Giorgio Topa & Wilbert Van der Klaauw & Basit Zafar, 2017. "An overview of the Survey of Consumer Expectations," Economic Policy Review, Federal Reserve Bank of New York, issue 23-2, pages 51-72.
    10. Yiqun Gloria Chen, 2019. "Inflation, Inflation Expectations, and the Phillips Curve: Working Paper 2019-07," Working Papers 55501, Congressional Budget Office.
    11. Anderson, Soren T. & Kellogg, Ryan & Sallee, James M., 2013. "What do consumers believe about future gasoline prices?," Journal of Environmental Economics and Management, Elsevier, vol. 66(3), pages 383-403.
    12. Sandor Axelrod & David E. Lebow & Ekaterina V. Peneva, 2018. "Perceptions and Expectations of Inflation by U.S. Households," Finance and Economics Discussion Series 2018-073, Board of Governors of the Federal Reserve System (U.S.).
    13. Olkhov, Victor, 2019. "New Essentials of Economic Theory," MPRA Paper 95065, University Library of Munich, Germany.
    14. Maxime Phillot & Rina Rosenblatt-Wisch, 2018. "Inflation Expectations: The Effect of Question Ordering on Forecast Inconsistencies," Working Papers 2018-11, Swiss National Bank.
    15. Dany-Knedlik, Geraldine & Holtemöller, Oliver, 2017. "Inflation dynamics during the financial crisis in Europe: Cross-sectional identification of long-run inflation expectations," IWH Discussion Papers 10/2017, Halle Institute for Economic Research (IWH).
    16. Gabriela Galati & Steven Poelhekke & Chen Zhou, 2011. "Did the Crisis Affect Inflation Expectations?," International Journal of Central Banking, International Journal of Central Banking, vol. 7(1), pages 167-207, March.
    17. Maurizio Bovi & Roy Cerqueti, 2016. "Forecasting macroeconomic fundamentals in economic crises," Annals of Operations Research, Springer, vol. 247(2), pages 451-469, December.
    18. Bruine de Bruin, Wändi & van der Klaauw, Wilbert & van Rooij, Maarten & Teppa, Federica & de Vos, Klaas, 2017. "Measuring expectations of inflation: Effects of survey mode, wording, and opportunities to revise," Journal of Economic Psychology, Elsevier, vol. 59(C), pages 45-58.
    19. Nautz, Dieter & Pagenhardt, Laura & Strohsal, Till, 2017. "The (de-)anchoring of inflation expectations: New evidence from the euro area," The North American Journal of Economics and Finance, Elsevier, vol. 40(C), pages 103-115.
    20. Alberto Cavallo & Guillermo Cruces & Ricardo Perez-Truglia, 2016. "Learning from Potentially-Biased Statistics: Household Inflation Perceptions and Expectations in Argentina," NBER Working Papers 22103, National Bureau of Economic Research, Inc.

    More about this item

    Keywords

    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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:onb:oenbmp:y:2011:i:2:b:3. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Claudia Kwapil). General contact details of provider: https://edirc.repec.org/data/oenbbat.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.