| Institution: | 1. Hosei University;2. Canon Institute for Global Studies, University of Tokyo;3. University of Tokyo
We thank our editor, Guido Menzio, and two anonymous referees for greatly improving this article. We also thank Anil Kashyap, Nobuhiro Kiyotaki, Edward Lazear, James Poterba, Stephen Redding, David Weinstein, and participants of the 2016 NBER Japan Project Meeting in Tokyo, Japan. This research forms part of the project on “Central Bank Communication Design” funded by a JSPS Grant-in-Aid for Scientific Research (No. 18H05217). |
| Abstract: | Using a new data set, we investigate the relationship between the inflation experience and expectations of households in Japan, focusing on the post-1995 deflationary era. Our first finding is that inflation expectations increase with age. Second, we find that measured inflation rates also increase with age, although age and inflation expectations continue to exhibit a positive correlation even after controlling for the household-level inflation rate. Analysis suggests that the correlation between age and inflation expectations is driven largely by the correlation between cohort and inflation expectations, which we interpret to represent the effect of historical inflation experience on inflation expectations. |
