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Learning, Heuristics and Anchored Inflation: How Do Different Types of Consumer Change Their Minds about Inflation?

Author

Listed:
  • Kevin Lee
  • Viet Nguyen
  • Kalvinder Shields

Abstract

Alternative models of actual and expected inflation are estimated to investigate how, in real time and as information arrives, different types of consumer learn about inflation. The models distinguish various views about learning including those based on Bayesian updating or on learning-rigidity heuristics. Using a detailed Australian survey, we find that learning is best characterised by periodic shifts in beliefs rather than incremental Bayesian adjustments, that different consumer groups learn at different times and from different experiences and that the inflation expectations of different groups are anchored on a range of reference inflation rates which do not move in sync.

Suggested Citation

  • Kevin Lee & Viet Nguyen & Kalvinder Shields, 2025. "Learning, Heuristics and Anchored Inflation: How Do Different Types of Consumer Change Their Minds about Inflation?," CAMA Working Papers 2025-28, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    • Handle: RePEc:een:camaaa:2025-28
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    File URL: https://crawford.anu.edu.au/sites/default/files/2025-05/28_2025_Lee_Nguyen_Shields_0.pdf
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    More about this item

    Keywords

    learning; updating; expectations; surveys; demographic groups; inflation anchor;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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