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Updates to Household Inflation Expectations: Signal or Noise?

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  • Yongchen Zhao

    (Department of Economics, Towson University)

Abstract

Using data from the New York Fed's Survey of Consumer Expectations, we examine the information content of the updates to household inflation expectations. We find that, although consumers frequently revise their expectations, the adjustments are largely uninformative.

Suggested Citation

  • Yongchen Zhao, 2019. "Updates to Household Inflation Expectations: Signal or Noise?," Working Papers 2019-01, Towson University, Department of Economics, revised May 2019.
    • Handle: RePEc:tow:wpaper:2019-01
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    References listed on IDEAS

    as
    1. 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.
    2. Pedro Bordalo & Nicola Gennaioli & Yueran Ma & Andrei Shleifer, 2020. "Overreaction in Macroeconomic Expectations," American Economic Review, American Economic Association, vol. 110(9), pages 2748-2782, September.
    3. Kajal Lahiri & Yongchen Zhao, 2016. "Determinants of Consumer Sentiment Over Business Cycles: Evidence from the US Surveys of Consumers," Journal of Business Cycle Research, Springer;Centre for International Research on Economic Tendency Surveys (CIRET), vol. 12(2), pages 187-215, December.
    4. Binder, Carola Conces, 2018. "Inflation expectations and the price at the pump," Journal of Macroeconomics, Elsevier, vol. 58(C), pages 1-18.
    5. Michael J. Lamla & Samad Sarferaz, 2012. "Updating inflation expectations," KOF Working papers 12-301, KOF Swiss Economic Institute, ETH Zurich.
    6. Jeffrey C. Fuhrer, 2018. "Intrinsic expectations persistence: evidence from professional and household survey expectations," Working Papers 18-9, Federal Reserve Bank of Boston.
    7. Binder, Carola, 2017. "Consumer forecast revisions: Is information really so sticky?," Economics Letters, Elsevier, vol. 161(C), pages 112-115.
    8. Dräger, Lena & Lamla, Michael J., 2012. "Updating inflation expectations: Evidence from micro-data," Economics Letters, Elsevier, vol. 117(3), pages 807-810.
    9. Nordhaus, William D, 1987. "Forecasting Efficiency: Concepts and Applications," The Review of Economics and Statistics, MIT Press, vol. 69(4), pages 667-674, November.
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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. An, Zidong & Zheng, Xinye, 2023. "Diligent forecasters can make accurate predictions despite disagreeing with the consensus," Economic Modelling, Elsevier, vol. 125(C).

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    More about this item

    Keywords

    Inflation expectations; revisions to expectations; household surveys; rational inattention.;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations

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