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Updating Behavior of Inflation Expectations: Evidence from Japanese Household Panel Data

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  • Ueno, Yuko
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    This study provides insights into the expectation-updating behavior of Japanese households with regard to future inflation. Households do not renew their information set in every period, but they do so at a greater frequency than that argued in the literature. A more volatile inflation rate leads to improved accuracy vis-à-vis expectations, given higher attention levels—although greater volatility does make it more difficult to form precise forecasts. Additionally, the estimation results involving inflation reflect variation in consumption basket by household attributes and are consistent; these results are clearer than those involving the consumer price index, thus indicating the possibility that households indeed face variations in inflation rate, depending on their characteristics.

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    File URL: http://hermes-ir.lib.hit-u.ac.jp/rs/bitstream/10086/26433/1/DP617.pdf
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    Paper provided by Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University in its series CIS Discussion paper series with number 617.

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    Length: 57 p.
    Date of creation: Feb 2014
    Handle: RePEc:hit:cisdps:617
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