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Inflation Expectation Formation of German Consumers: Rational or Adaptive?

  • Henry Sabrowski

    ()

    (Institute of Economics, Leuphana University of Lüneburg)

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    This paper analyzes the inflation expectation formation empirically for German consumers. The expectation formation process is analyzed for a representative consumer and for different demographic groups. The results indicate that German consumers are a relatively homogeneous group. There are nevertheless quantitative differences among the groups: Inflation expectations and perceived inflation tend to fall with rising income and unemployed individuals are outliers. Rational inflation expectation is not present for any group. Consumer and expert expectations have short and long run relationships. Evidence for a positive constant gain in the adaptive learning algorithm is given for almost all groups.

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    File URL: http://www.leuphana.de/fileadmin/user_upload/Forschungseinrichtungen/ifvwl/WorkingPapers/wp_100_Upload.pdf
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    Paper provided by University of Lüneburg, Institute of Economics in its series Working Paper Series in Economics with number 100.

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    Length: 44 pages
    Date of creation: 21 Oct 2008
    Date of revision:
    Handle: RePEc:lue:wpaper:100
    Contact details of provider: Web page: http://leuphana.de/institute/ivwl.html

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