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Measuring Inflation Expectations

Author

Listed:
  • Olivier Armantier

    (Federal Reserve Bank of New York, New York, NY 10045)

  • Wändi Bruine de Bruin

    (Centre for Decision Research, Leeds University Business School, Leeds LS2 9JT, United Kingdom
    Department of Engineering and Public Policy, Carnegie Mellon University, Pittsburgh, Pennsylvania 15213)

  • Simon Potter

    (Federal Reserve Bank of New York, New York, NY 10045)

  • Giorgio Topa

    (Federal Reserve Bank of New York, New York, NY 10045)

  • Wilbert van der Klaauw

    (Federal Reserve Bank of New York, New York, NY 10045)

  • Basit Zafar

    (Federal Reserve Bank of New York, New York, NY 10045)

Abstract

To conduct monetary policy, central banks around the world increasingly rely on measures of public inflation expectations. In this article, we review findings from an ongoing initiative at the Federal Reserve Bank of New York aimed at improving the measurement and our understanding of household inflation expectations through surveys. We discuss the importance of question wording and the usefulness of new questions to elicit an individual’s distribution of inflation beliefs. We present evidence suggesting that consumers update their inflation expectations in response to new information and that information dissemination may lead to more informed and reliable reporting of inflation expectations. Finally, we report on a financially incentivized experiment suggesting that expectations surveys are informative and that respondents generally act on their stated beliefs in a way consistent with expected utility theory.

Suggested Citation

  • Olivier Armantier & Wändi Bruine de Bruin & Simon Potter & Giorgio Topa & Wilbert van der Klaauw & Basit Zafar, 2013. "Measuring Inflation Expectations," Annual Review of Economics, Annual Reviews, vol. 5(1), pages 273-301, May.
    • Handle: RePEc:anr:reveco:v:5:y:2013:p:273-301
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    File URL: http://www.annualreviews.org/doi/abs/10.1146/annurev-economics-081512-141510
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    More about this item

    Keywords

    surveys; information; updating; behavior; monetary policy; experiments;
    All these keywords.

    JEL classification:

    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • E64 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Incomes Policy; Price Policy

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