Updating inflation expectations: Evidence from micro-data

Dräger, Lena; Lamla, Michael J.

doi:10.1016/j.econlet.2012.08.033

“…Regarding the link between disagreement from qualitative and quantitative questions, we find reasonably high positive correlations between the qualitative measures and the IQR, while the link is considerably weaker when comparing the SD. This suggests that survey expectations extracted from qualitative and quantitative questions are not entirely substitutable, a result that is also confirmed in Dräger and Lamla (). Nevertheless, we argue that the measures are close enough to employ the IQV of short‐run qualitative inflation expectations together with the corresponding disagreement measures for nominal interest‐rate expectations and unemployment expectations .…”

Section: Measuring Disagreementsupporting

confidence: 70%

Explaining Disagreement on Interest Rates in a Taylor‐Rule Setting

Dräger

¹

,

Lamla

²

2017

Scandinavian J Economics

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. There is a growing interest in studying the disagreement of economic agents. Most studies, however, focus on the disagreement regarding one specific variable, hereby neglecting that disagreement may be comoving with disagreement on other variables. In this paper we explore to which extent disagreement regarding the interest rate is driven by disagreement on inflation and on unemployment. This relationship can be motivated by the existence of the Taylor rule. Using micro survey data for both professional forecasters and consumers, we provide evidence that disagreement on the future interest rate is mainly driven by disagreement on inflation. Exploring further determinants, we confirm that central bank transparency as well as news on money and credit conditions significantly influence disagreement. Terms of use: Documents in EconStor may

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“…We choose the Michigan survey since household expectations in this survey are often used in the macroeconomics literature (e.g. Carroll, 2003;Ang et al, 2007;Dräger and Lamla, 2012). Through the use of the Swedish survey, we can consistently compare our results with those of Maag (2009).…”

Section: Introductionmentioning

confidence: 99%

Measuring Disagreement in Qualitative Expectations

Mokinski

¹

,

Sheng

²

,

Yang

³

2015

Journal of Forecasting

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We assess how well measures of disagreement in qualitative survey expectations reflect disagreement in corresponding quantitative expectations. We consider a variety of measures, belonging to two categories: measures of dispersion in nominal and ordinal variables and measures based on the probability approach of Carlson and Parkin (Economica, 1975; 42, 123–138). Using data from two household surveys that collect both qualitative and quantitative inflation expectations, we find that the probability approaches with time‐varying categorization thresholds and either a piecewise uniform or t distribution perform best and the resulting disagreement estimates are highly correlated with the benchmark. Copyright © 2015 John Wiley & Sons, Ltd.

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“…With regard to the updating frequency, Doepke, Dovern, Fritsche, and Slacalek (2008) apply Carroll's framework to European data, and report a somewhat lower updating frequency of around 18 months. Using the Michigan Consumer Survey microdata, Dräger and Lamla (2012) provide evidence that quantitative in ‡ation expectations are adjusted rel-atively frequently, whereas the qualitative assessment (whether prices in general will go up, down or stay where they are now) changes less often. Qualitatively, the expectations tend to change mostly if the quantitative adjustment is substantial.…”

Section: Introductionmentioning

confidence: 99%

Consumer Attitudes and the Epidemiology of Inflation Expectations

Ehrmann

¹

,

Pfajfar

²

,

Santoro

³

2014

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AcknowledgementsWe would like to thank seminar participants at Newcastle University, Lund University, the Bank of Canada and the 2013 CEF meetings in Vancouver.iii AbstractThis paper studies the formation of consumers' inflation expectations using micro-level data from the Michigan Survey. It shows that beyond the well-established socioeconomic determinants of inflation expectations such as gender, income or education, other characteristics such as the households' financial situation and their purchasing attitudes also matter. Respondents with current or expected financial difficulties, pessimistic attitudes about major purchases, or expectations that income will go down in the future have considerably higher forecast errors, are further away from professional forecasts, and have a stronger upward bias in their expectations than other households. However, their bias shrinks by more than that of the average household in response to increasing media reporting about inflation. JEL classification: C53, D84, E31 Bank classification: Inflation and prices RésuméLes auteurs étudient la formation des attentes des consommateurs en matière d'inflation à partir de microdonnées tirées de l'enquête menée par l'Université du Michigan auprès des consommateurs. Ils montrent qu'au-delà des déterminants socio-économiques des attentes d'inflation bien établis comme le sexe, le revenu ou le niveau de scolarité, d'autres caractéristiques telles que la situation financière des ménages et leurs attitudes d'achat sont également importantes. Les répondants qui éprouvent ou anticipent des difficultés financières, qui sont pessimistes à l'égard des gros achats ou qui entrevoient une diminution de leur revenu futur commettent des erreurs de prévision beaucoup plus grandes que les autres ménages; en outre, leurs attentes s'éloignent davantage des prévisions des professionnels et elles comportent un biais à la hausse plus prononcé. Cependant, ce biais se réduit de manière plus marquée que celui du ménage moyen en réponse à une couverture médiatique accrue concernant l'inflation.

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Updating inflation expectations: Evidence from micro-data

Cited by 31 publications

References 10 publications

Explaining Disagreement on Interest Rates in a Taylor‐Rule Setting

Explaining Disagreement on Interest Rates in a Taylor‐Rule Setting

Measuring Disagreement in Qualitative Expectations

Consumer Attitudes and the Epidemiology of Inflation Expectations

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