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

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  • Ueno, Yuko

Abstract

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.

Suggested Citation

  • Ueno, Yuko, 2014. "Updating Behavior of Inflation Expectations: Evidence from Japanese Household Panel Data," CIS Discussion paper series 617, Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University.
  • Handle: RePEc:hit:cisdps:617
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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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    Cited by:

    1. Shioji, Etsuro, 2015. "Time varying pass-through: Will the yen depreciation help Japan hit the inflation target?," Journal of the Japanese and International Economies, Elsevier, vol. 37(C), pages 43-58.

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    Keywords

    Inflation; survey expectations; information stickiness; rational inattention; forecast error;

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