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Modeling consumers' confidence and inflation expectations

Author

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  • Ashima Goyal

    (Indira Gandhi Institute of Development Research)

  • Prashant Parab

    (Indira Gandhi Institute of Development Research)

Abstract

Using Consumer Confidence Survey data we analyze socio-economic as well as macroeconomic factors that influence inflation expectations of Indian households. We discover that inflation expectations of households depend largely on inflation perceptions, income and education of the respondents, as well as their outlook on the economy, employment and spending. Women, lower income individuals and less educated persons tend to have higher inflation expectations. Macroeconomic variables like inflation, repo rate and GDP growth rate influence inflation expectations positively. Along with these variables, Reserve Bank of India inflation projections influence inflation expectations. Therefore, the Reserve Bank has a significant role in anchoring inflation expectations via communications. Since a rise in Repo, as well as lower growth, raise inflation expectations, it must also give weight to growth under inflation targeting.

Suggested Citation

  • Ashima Goyal & Prashant Parab, 2019. "Modeling consumers' confidence and inflation expectations," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2019-025, Indira Gandhi Institute of Development Research, Mumbai, India.
  • Handle: RePEc:ind:igiwpp:2019-025
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    File URL: http://www.igidr.ac.in/pdf/publication/WP-2019-025.pdf
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    Cited by:

    1. Carlos Medel, 2021. "Searching for the Best Inflation Forecasters within a Consumer Perceptions Survey: Microdata Evidence from Chile," Working Papers Central Bank of Chile 899, Central Bank of Chile.

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    More about this item

    Keywords

    Consumer confidence survey; Inflation expectations; Socio-economic variables; Ordered logit; Central Bank communications;
    All these keywords.

    JEL classification:

    • C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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