Determinants of Inflation Perceptions and Expectations: an Empirical Analysis for Austria

This study uses micro data from a survey among 2,000 Austrian households conducted in 2013 to investigate the socioeconomic determinants of inflation perceptions and expectations. In our econometric analysis, we find that socioeconomically disadvantaged respondents (less income, lower educational attainment) and older interviewees tend to have higher inflation perceptions. In contrast, respondents living in larger households or in agglomerations with more than 5,000 inhabitants have lower inflation perceptions. As to inflation expectations, we find that older and less educated people tend to report higher inflation expectations. Additionally, we document that women tend to have higher inflation expectations than men and that knowledge of the Eurosystem’s definition of price stability dampens inflation expectations. Moreover, respondents who are skeptical about the reliability of the official inflation indicators state higher inflation expectations. As largely correct and realistic inflation perceptions and expectations are important for the credibility of monetary policy, these results suggest that financial education strategies should be focused on population groups with lower educational attainment, less income and on younger people.