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Inflation Expectation Formation of German Consumers: Rational or Adaptive?

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  • Henry Sabrowski

    () (Institute of Economics, Leuphana University of Lüneburg)

Abstract

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.

Suggested Citation

  • Henry Sabrowski, 2008. "Inflation Expectation Formation of German Consumers: Rational or Adaptive?," Working Paper Series in Economics 100, University of Lüneburg, Institute of Economics.
  • Handle: RePEc:lue:wpaper:100
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    References listed on IDEAS

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    1. repec:gam:jsusta:v:10:y:2018:i:3:p:886-:d:137142 is not listed on IDEAS
    2. Carlos Huertas Campos & Eliana González Molano & Cristhian Ruiz Cardozo, 2015. "La formación de expectativas de inflación en Colombia," BORRADORES DE ECONOMIA 012699, BANCO DE LA REPÚBLICA.

    More about this item

    Keywords

    Inflation expectations; conversion method; survey data; rationality tests;

    JEL classification:

    • C42 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Survey Methods
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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