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Consumer forecast revisions: Is information really so sticky?

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  • Binder, Carola

Abstract

Previous studies using consumer survey data on inflation expectations find that consumers revise their inflation forecasts approximately once every eight months, suggesting that information is quite “sticky.” However, in the consumer survey data analyzed, respondents take the survey twice with a six-month gap, and responses are reported to the nearest integer. Both the low frequency and the rounding result in overestimation of information stickiness. Higher-frequency unrounded data reveals that consumers revise their inflation expectations far more frequently—about five times in an eight month period.

Suggested Citation

  • Binder, Carola, 2017. "Consumer forecast revisions: Is information really so sticky?," Economics Letters, Elsevier, vol. 161(C), pages 112-115.
    • Handle: RePEc:eee:ecolet:v:161:y:2017:i:c:p:112-115
    DOI: 10.1016/j.econlet.2017.09.029
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    References listed on IDEAS

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    Cited by:

    1. Lahiri, Kajal & Zhao, Yongchen, 2020. "The Nordhaus test with many zeros," Economics Letters, Elsevier, vol. 193(C).
    2. Zhao, Yongchen, 2019. "Updates to household inflation expectations: Signal or noise?," Economics Letters, Elsevier, vol. 181(C), pages 95-98.
    3. An, Zidong & Liu, Dingqian & Wu, Yuzheng, 2021. "Expectation formation following pandemic events," Economics Letters, Elsevier, vol. 200(C).
    4. Juan Camilo Anzoátegui-Zapata & Juan Camilo Galvis-Ciro, 2020. "Disagreements in Consumer Inflation Expectations: Empirical Evidence for a Latin American Economy," Journal of Business Cycle Research, Springer;Centre for International Research on Economic Tendency Surveys (CIRET), vol. 16(2), pages 99-122, November.
    5. Tsiaplias, Sarantis, 2020. "Time-Varying Consumer Disagreement and Future Inflation," Journal of Economic Dynamics and Control, Elsevier, vol. 116(C).
    6. Daniel J. Lewis & Christos Makridis & Karel Mertens, 2019. "Do Monetary Policy Announcements Shift Household Expectations?," Staff Reports 897, Federal Reserve Bank of New York.
    7. Constantin Bürgi, 2020. "Consumer Inflation Expectations and Household Weights," Working Papers 2020-002, The George Washington University, Department of Economics, H. O. Stekler Research Program on Forecasting.
    8. Zidong An & Salem Abo‐Zaid & Xuguang Simon Sheng, 2023. "Inattention and the impact of monetary policy," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 38(4), pages 623-643, June.
    9. Carola Binder & Wesley Janson & Randal J. Verbrugge, 2019. "Thinking Outside the Box: Do SPF Respondents Have Anchored Inflation Expectations?," Working Papers 19-15, Federal Reserve Bank of Cleveland.

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    More about this item

    Keywords

    Inflation expectations; Information rigidities; Sticky information; Consumer surveys;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations

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