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Greater Than the Sum of Its Parts: Aggregate vs. Aggregated Inflation Expectations

Author

Listed:
  • Alexander Dietrich
  • Edward S. Knotek II
  • Kristian O. Myrseth
  • Robert W. Rich
  • Raphael Schoenle
  • Michael Weber

Abstract

This paper introduces a novel measure of consumer inflation expectations: We elicit and combine inflation forecasts across categories of personal consumption expenditure to form an aggregated measure of inflation expectations. Drawing on nearly 60,000 respondents, our data comprise the early low-inflation environment of the COVID pandemic and the 2021 inflation surge. Conventionally elicited inflation expectations consistently exceed aggregated measures constructed under plausible weighting schemes. Aggregated measures display less disagreement and volatility and are stronger predictors of consumers’ spending plans. The relative informational value of aggregated measures rises with the individual-level gap between conventional and aggregated inflation expectations. Our results chart a new course for designing measurement of inflation expectations.

Suggested Citation

  • Alexander Dietrich & Edward S. Knotek II & Kristian O. Myrseth & Robert W. Rich & Raphael Schoenle & Michael Weber, 2023. "Greater Than the Sum of Its Parts: Aggregate vs. Aggregated Inflation Expectations," NBER Working Papers 31822, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:31822
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    More about this item

    JEL classification:

    • C83 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Survey Methods; Sampling Methods
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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