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Overreaction in inflation expectations: Do behavioral attributes of individuals matter?

Author

Listed:
  • Takayuki Tsuruga
  • Zichong Yue

Abstract

Previous studies on inflation expectations suggest that agents often overreact to public signals, pointing to a role for behavioral explanations and motivating extensions of standard macroeconomic models beyond full-information rational expectations. Using the survey data that include a variety of questions related to behavioral economics, we examine how behavioral attributes of individuals interact with the overreaction to public signals. We find that even individuals with rational behavioral attributes overreact to public signals. These findings suggest that overreaction is a distinct phenomenon that cannot be fully attributed to well-documented behavioral biases such as present bias or myopia.

Suggested Citation

  • Takayuki Tsuruga & Zichong Yue, 2026. "Overreaction in inflation expectations: Do behavioral attributes of individuals matter?," ISER Discussion Paper 1309, Institute of Social and Economic Research, The University of Osaka.
    • Handle: RePEc:dpr:wpaper:1309
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    References listed on IDEAS

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