Consumers' Attitudes and Their Inflation Expectations

Ehrmann, Michael; Pfajfar, Damjan; Santoro, Emiliano

doi:10.2139/ssrn.2595719

Cited by 23 publications

(42 citation statements)

References 38 publications

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“…Again in line with the macroeconomic effects observed in Table 7, consumers are less likely to be consistent with the Taylor rule if they observed news on high prices. Ehrmann et al (2015) show that the correlation between perceived news on price increases and inflation of retail gasoline prices is very high (0.63), thus one can expect that this type of news is perceived as a supply shock and therefore is not consistent with the Phillips curve relationship and the Taylor rule. For the Income Fisher equation, the likelihood of consistency is higher with news on high unemployment and lower if the consumers observed news on low unemployment or easy credit conditions.…”

Section: Results For Consumersmentioning

confidence: 97%

“…The only exception is perceived news on high inflation. However, we have to take into account that perceived news on inflation mainly reflect consumer experiences with frequently purchased items, where gasoline prices play a predominant role (see Ehrmann et al, 2015). Regarding the sender channel, we can only assess whether specific communication milestones have increased the level of news in the economy or the average perception of news.…”

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confidence: 99%

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Are survey expectations theory-consistent? The role of central bank communication and news

Dräger

Lamla

Pfajfar

2016

European Economic Review

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114

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In this paper we analyze whether central bank communication can facilitate the understanding of key economic concepts. Using survey data for consumers and professionals, we calculate how many of them have expectations consistent with the Fisher Equation, the Taylor rule and the Phillips curve and test, by accounting for three different communication channels, whether central banks can influence those. A substantial share of participants has expectations consistent with the Fisher equation, followed by the Taylor rule and the Phillips curve. We show that having theory-consistent expectations is beneficial, as it improves the forecast accuracy. Furthermore, consistency is time varying. Exploring this time variation, we provide evidence that central bank communication as well as news on monetary policy can facilitate the understanding of those concepts and thereby improve the efficacy of monetary policy.

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Section: Results For Consumersmentioning

confidence: 97%

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confidence: 99%

Are survey expectations theory-consistent? The role of central bank communication and news

Dräger

Lamla

Pfajfar

2016

European Economic Review

Self Cite

114

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“…Literature on survey inflation expectations commonly identifies the bias in inflation expectations, and several sociodemographic characteristics and macroeconomic conditions have been identified to explain part of this bias (see, for example, Ehrmann et al, 2017or Souleles, 2004. In this paper, we control for sociodemographic characteristics and macroeconomic conditions, and we are still able to identify both inflation and deflationary biases.…”

Section: Introductionmentioning

confidence: 87%

Inflation and Deflationary Biases in Inflation Expectations

Lamla

Pfajfar

Rendell³

2019

FEDS

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We explore the consequences of losing confidence in the price-stability objective of central banks by quantifying the inflation and deflationary biases in inflation expectations. In a model with an occasionally binding zero-lower-bound constraint, we show that an inflation bias as well as a deflationary bias exist as a steady-state outcome. We assess the predictions of this model using unique individual-level inflation expectations data across nine countries that allow for a direct identification of these biases. Both inflation and deflationary biases are present (and sizable) in inflation expectations of these individuals. Among the euro-area countries in our sample, we can document significant differences in perceptions of the European Central Bank's objectives, despite having a common monetary policy.

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“…After estimating and rescaling responses for the 2008-2012 sample, we also find larger response to our baseline shocks.20 See for instanceCarroll (2003),Doms and Morin (2004),Ehrmann, Pfajfar, and Santoro (2017),and Larsen, Thorsrud, and Zhulanova (2019) …”

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confidence: 64%

Do Monetary Policy Announcements Shift Household Expectations?

Lewis¹,

Makridis²,

Mertens³

2019

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We use daily survey data from Gallup to assess whether households' beliefs about economic conditions are influenced by surprises in monetary policy announcements. We first provide more general evidence that public confidence in the state of the economy reacts to certain types of macroeconomic news very quickly. Next, we show that surprises to the Federal Funds target rate are among the news that have statistically significant and instantaneous effects on economic confidence. In contrast, surprises about forward guidance and asset purchases do not have similar effects on household beliefs, perhaps because they are less well understood. We document heterogeneity in the responsiveness of sentiment across demographics.

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Consumers' Attitudes and Their Inflation Expectations

Cited by 23 publications

References 38 publications

Are survey expectations theory-consistent? The role of central bank communication and news

Are survey expectations theory-consistent? The role of central bank communication and news

Inflation and Deflationary Biases in Inflation Expectations

Do Monetary Policy Announcements Shift Household Expectations?

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