IDEAS home Printed from https://ideas.repec.org/p/nbp/nbpmis/347.html
   My bibliography  Save this paper

Consumer inflation expectations and regional price changes

Author

Listed:
  • Tomasz Łyziak

    (National Bank of Poland)

  • Michael Pedersen

    (Universidad Adolfo Ibáñez Business School)

  • Ewa Stanisławska

    (National Bank of Poland)

Abstract

Employing micro and aggregate observations on inflation expectations, we analyze the extent to which US consumers are affected by regional price swings when reporting their predictions of inflation. We begin with the aggregate data analysis based on a generalized sticky information model. The results indicate that regional differences in inflation rates do exert a statistically significant impact on disagreement in inflation expectations among consumers. However, the quantitative importance of this effect is small. The second part of the analysis employs micro survey observations to assess the importance of regional prices in the formation of inflation expectations. This is done, firstly, by considering a framework in which information is sticky and, secondly, in a context where consumer’s experience of inflation matters when forming expectations. We find that regional rather than national inflation rates affect consumers’ views on inflation in short- and medium-term horizon.

Suggested Citation

  • Tomasz Łyziak & Michael Pedersen & Ewa Stanisławska, 2022. "Consumer inflation expectations and regional price changes," NBP Working Papers 347, Narodowy Bank Polski.
    • Handle: RePEc:nbp:nbpmis:347
    as

    Download full text from publisher

    File URL: https://static.nbp.pl/publikacje/materialy-i-studia/347_en.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Andreas I. Mueller & Johannes Spinnewijn & Giorgio Topa, 2021. "Job Seekers' Perceptions and Employment Prospects: Heterogeneity, Duration Dependence, and Bias," American Economic Review, American Economic Association, vol. 111(1), pages 324-363, January.
    2. Damjan Pfajfar & Emiliano Santoro, 2013. "News on Inflation and the Epidemiology of Inflation Expectations," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 45(6), pages 1045-1067, September.
    3. Thomas J. Sargent, 1982. "The Ends of Four Big Inflations," NBER Chapters, in: Inflation: Causes and Effects, pages 41-98, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Marco Bassetto, 2009. "The Research Agenda: Marco Bassetto on the Quantitative Evaluation of Fiscal Policy Rules," EconomicDynamics Newsletter, Review of Economic Dynamics, vol. 10(2), April.
    2. Bordo, Michael D., 1986. "Explorations in monetary history: A survey of the literature," Explorations in Economic History, Elsevier, vol. 23(4), pages 339-415, October.
    3. Edwards, Sebastian, 2020. "Change of monetary regime, contracts, and prices: Lessons from the great depression, 1932–1935," Journal of International Money and Finance, Elsevier, vol. 108(C).
    4. Peter Carr & Travis Fisher & Johannes Ruf, 2014. "On the hedging of options on exploding exchange rates," Finance and Stochastics, Springer, vol. 18(1), pages 115-144, January.
    5. Michele Belot & Philipp Kircher & Paul Muller, 2021. "Eliciting time preferences when income and consumption vary: Theory, validation & application to job search," Tinbergen Institute Discussion Papers 21-013/V, Tinbergen Institute.
    6. Chodorow-Reich, Gabriel & Coglianese, John, 2021. "Projecting unemployment durations: A factor-flows simulation approach with application to the COVID-19 recession," Journal of Public Economics, Elsevier, vol. 197(C).
    7. Henry, Peter B., 2000. "Is Disinflation Good for Growth?," Research Papers 1657, Stanford University, Graduate School of Business.
    8. Williamson, Stephen D., 2018. "Can the fiscal authority constrain the central bank?," Journal of Economic Dynamics and Control, Elsevier, vol. 89(C), pages 154-172.
    9. Karl Whelan, 2021. "Central banks and inflation: where do we stand and how did we get here?," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 18(3), pages 310–330-3, December.
    10. Makoto Saito, 2021. "Central Banknotes and Black Markets: The Case of the Japanese Economy During and Immediately After World War II," Advances in Japanese Business and Economics, in: Strong Money Demand in Financing War and Peace, pages 25-56, Springer.
    11. Michael J. Lamla & Lena Draeger, 2013. "Anchoring of Consumers' Inflation Expectations," KOF Working papers 13-339, KOF Swiss Economic Institute, ETH Zurich.
    12. Larsen, Vegard H. & Thorsrud, Leif Anders & Zhulanova, Julia, 2021. "News-driven inflation expectations and information rigidities," Journal of Monetary Economics, Elsevier, vol. 117(C), pages 507-520.
    13. Castro, Vitor & Veiga, Francisco Jose, 2004. "Political business cycles and inflation stabilization," Economics Letters, Elsevier, vol. 83(1), pages 1-6, April.
    14. Tito Belchior Silva Moreira & Benjamin Miranda Tabak & Mario Jorge Mendonça & Adolfo Sachsida, 2016. "An Evaluation of the Non-Neutrality of Money," PLOS ONE, Public Library of Science, vol. 11(3), pages 1-20, March.
    15. Sargent, Thomas J, 1982. "Beyond Demand and Supply Curves in Macroeconomics," American Economic Review, American Economic Association, vol. 72(2), pages 382-389, May.
    16. Bart Cockx & Koen Declercq & Muriel Dejemeppe, 2022. "Losing Prospective Entitlement to Unemployment Benefits. Impact on Educational Attainment," CESifo Working Paper Series 9852, CESifo.
    17. Battilossi, Stefano, 2003. "Capital mobility and financial repression in Italy, 1960-1990 : a public finance perspective," IFCS - Working Papers in Economic History.WH wh030602, Universidad Carlos III de Madrid. Instituto Figuerola.
    18. Stefano Della & Jörg Heining & Johannes F Schmieder & Simon Trenkle, 2023. "Evidence on Job Search Models from a Survey of Unemployed Workers in Germany," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 137(2), pages 1181-1232.
    19. Lahiri, Kajal & Zhao, Yongchen, 2020. "The Nordhaus test with many zeros," Economics Letters, Elsevier, vol. 193(C).
    20. P. Antipa & C. Chamley, 2017. "Monetary and Fiscal Policy in England during the French Wars (1793-1821)," Working papers 627, Banque de France.

    More about this item

    Keywords

    Inflation; consumer expectations; experience; sticky information; local prices.;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbp:nbpmis:347. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Jakub Growiec (email available below). General contact details of provider: https://edirc.repec.org/data/nbpgvpl.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.