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First-order and higher-order inflation expectations: Evidence about households and firms

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  • Kieren, Pascal
  • König-Kersting, Christian
  • Schmidt, Robert J.
  • Trautmann, Stefan T.
  • Theurich, Franziska

Abstract

We study first-order and higher-order inflation expectations of German households and firms elicited from surveys. The data allows to shed light on the relation between different orders of beliefs, and to derivate implications for noisy-information models with infinite regress. Moreover, since the elicited data is identical for households and firms, it also allows studying whether the relation between first-order and higher-order beliefs differs between the two samples. While we find that this relation is mostly identical between households and firms in our data, we identify differences to previously elicited data in the literature. We discuss potential sources for these differences and their theoretical implications.

Suggested Citation

  • Kieren, Pascal & König-Kersting, Christian & Schmidt, Robert J. & Trautmann, Stefan T. & Theurich, Franziska, 2024. "First-order and higher-order inflation expectations: Evidence about households and firms," Discussion Papers 18/2024, Deutsche Bundesbank.
    • Handle: RePEc:zbw:bubdps:299240
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    References listed on IDEAS

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    More about this item

    Keywords

    Inflation expectations; higher-order beliefs; noisy-information models; surveys;
    All these keywords.

    JEL classification:

    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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