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Uncertainty and Disagreement of Inflation Expectations: Evidence from Household-Level Qualitative Survey Responses

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  • Yongchen Zhao

    (Department of Economics, Towson University)

Abstract

We propose a procedure that jointly estimates expectation, uncertainty, and disagreement using a flexible hierarchical ordered response model and individual-level qualitative data. Based on the Michigan survey of US consumers, our results reveal how their inflation expectations and the associated uncertainty are affected by various factors, including their perceptions of economic conditions, recollections of relevant news reports, and sociodemographic characteristics. An examination of the dynamics of inflation uncertainty and disagreement produces evidence in support of using the latter as a proxy of the former. However, our results also highlight important episodes (such as the start of the COVID pandemic) in which the two series diverge.

Suggested Citation

  • Yongchen Zhao, 2021. "Uncertainty and Disagreement of Inflation Expectations: Evidence from Household-Level Qualitative Survey Responses," Working Papers 2021-03, Towson University, Department of Economics, revised Dec 2021.
    • Handle: RePEc:tow:wpaper:2021-03
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    References listed on IDEAS

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    Cited by:

    1. Zhao, Yongchen, 2024. "Uncertainty of household inflation expectations: Reconciling point and density forecasts," Economics Letters, Elsevier, vol. 234(C).
    2. Chee-Hong Law & Kim Huat Goh, 2024. "A systematic literature review of the implications of media on inflation expectations," International Economics and Economic Policy, Springer, vol. 21(2), pages 311-340, May.
    3. Xiangdong Shen & Junbin Wang & Li Wang & Chunlan Jiao, 2023. "Forecasting the different influencing factors of household food waste behavior in China under the COVID‐19 pandemic," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 42(8), pages 2322-2340, December.

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    More about this item

    Keywords

    Joint estimation; Quantification; Household demographics; Subjective news shocks; Hierarchical ordered response model.;
    All these keywords.

    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General

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