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Households Forming Inflation Expectations: Active and Passive Absorption Rates

Author

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  • Easaw Joshy

    (Swansea University)

  • Golinelli Roberto

    (University of Bologna)

Abstract

Recent research has established that households "absorb" from professional forecasters as they form their inflation expectations. Professionals' forecasts are transmitted, or "absorbed," throughout the population slowly but eventually. This provides the microfoundations for "sticky information" expectations. Using a unique survey-based dataset for the UK that distinguishes between professional and non-professional forecasts and where the former is further categorize by occupations, the present paper attempts to identify the professional forecaster. The paper also considers whether absorption rates take place heterogeneously amongst the "absorbing" agents. We identify "active" and "passive" absorbers amongst the agents and they are distinguished by their respective absorption rates. The present analyses also consider whether these absorption rates are non-linear.

Suggested Citation

  • Easaw Joshy & Golinelli Roberto, 2010. "Households Forming Inflation Expectations: Active and Passive Absorption Rates," The B.E. Journal of Macroeconomics, De Gruyter, vol. 10(1), pages 1-32, November.
    • Handle: RePEc:bpj:bejmac:v:10:y:2010:i:1:n:35
    DOI: 10.2202/1935-1690.2070
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    Cited by:

    1. J. Easaw & R. Golinelli, 2012. "Household Inflation Expectations: Information Gathering, Inattentive or Stubborn ?," Working Papers wp853, Dipartimento Scienze Economiche, Universita' di Bologna.
    2. Easaw, Joshy & Golinelli, Roberto & Malgarini, Marco, 2013. "What determines households inflation expectations? Theory and evidence from a household survey," European Economic Review, Elsevier, vol. 61(C), pages 1-13.
    3. J. Easaw & R. Golinelli & M. Malgarini, 2012. "Do Households Anchor their Inflation Expectations? Theory and Evidence from a Household Survey," Working Papers wp842, Dipartimento Scienze Economiche, Universita' di Bologna.
    4. Timo Henckel & Gordon D. Menzies & Daniel J. Zizzo, 2013. "The Great Recession and the Two Dimensions of European Central Bank Credibility," CAMA Working Papers 2013-55, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    5. Lena Draeger, 2011. "Endogenous persistence with recursive inattentiveness," KOF Working papers 11-285, KOF Swiss Economic Institute, ETH Zurich.
    6. Easaw, Joshy & Golinelli, Roberto, 2014. "Inflation Expectations and the Two Forms of Inattentiveness," Cardiff Economics Working Papers E2014/21, Cardiff University, Cardiff Business School, Economics Section.
    7. Jenyu Chou & Yifei Cao & Patrick Minford, 2023. "Evaluation and indirect inference estimation of inattentive features in a New Keynesian framework," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 42(3), pages 530-542, April.
    8. Guimarães, Rodrigo, 2014. "Expectations, risk premia and information spanning in dynamic term structure model estimation," Bank of England working papers 489, Bank of England.
    9. Ashima Goyal & Prashant Parab, 2019. "Modeling heterogeneity and rationality of inflation expectations across Indian households," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2019-02, Indira Gandhi Institute of Development Research, Mumbai, India.
    10. Hossein Hassani & Jan Coreman & Saeed Heravi & Joshy Easaw, 2018. "Forecasting Inflation Rate: Professional Against Academic, Which One is More Accurate," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 16(3), pages 631-646, September.
    11. Easaw Joshy & Mossay Pascal, 2015. "Households forming macroeconomic expectations: inattentive behavior with social learning," The B.E. Journal of Macroeconomics, De Gruyter, vol. 15(1), pages 339-363, January.

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