Consumer Attitudes and the Epidemiology of Inflation Expectations

M. Ehrmann, D. Pfajfar, E. Santoro

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Abstract

This paper studies the formation of consumers’ infl‡ation expectations using
micro-level data from the Michigan Survey. It shows that beyond the well-established socio-economic determinants of infl‡ation expectations like gender, income or education also other characteristics like the household’s fi…nancial situation and its purchasing attitudes matter. Respondents with current or expected …financial difficulties, with pessimistic attitudes about major purchases, or who expect income to go down in the future have considerably higher forecast errors, are further away from professional forecasts and have a stronger updward bias in their expectations than other households. However, their bias shrinks by more than the one of the average household in response to increasing media reporting about in‡flation.
Original languageEnglish
Place of PublicationTilburg
PublisherEconomics
Number of pages36
Volume2014-029
Publication statusPublished - 15 Apr 2014

Publication series

NameCentER Discussion Paper
Volume2014-029

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Keywords

  • Suvey inflation expectations
  • news on inflation
  • Information Stickiness
  • Consumer attitudes

Cite this

Ehrmann, M., Pfajfar, D., & Santoro, E. (2014). Consumer Attitudes and the Epidemiology of Inflation Expectations. (CentER Discussion Paper; Vol. 2014-029). Tilburg: Economics.