Endogenous expectation formation methods: Evidence from consumers' inflation expectations |
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| Affiliation: | 1. Lancaster University Management School, Lancaster, LA1 4YX, United Kingdom;2. Department of Economics, University of Nevada Las Vegas, Las Vegas, NV 89154-6005, United States;3. Department of Economics, State University of New York at Binghamton, Binghamton, NY 13902-6000, United States;4. UiS Business School and Centre for Innovation Research, University of Stavanger, 4036 Stavanger, Norway;1. FRBNY, 33 Liberty Street, New York, NY 10045 United States;2. University of Texas at Austin, 2225 Speedway, Austin, TX 78712, United States;3. FRBNY & IZA, 33 Liberty Street, New York, NY 10045, United States;1. Department of Sustainability Science and Department of Economics, Leuphana University of Lüneburg, 21335 Lüneburg, Germany;2. Department of International Economic Policy, University of Freiburg, 79085 Freiburg i. Br., Germany;1. School of Economics and Management, Beihang University, Beijing, China;2. Department of Accounting and Information, Ling Tung University, Taichung, Taiwan;3. Department of Finance, West University of Timisoara, Timisoara, Romania;4. Department of Finance, Ocean University of China, Qingdao, China |
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| Abstract: | This paper analyzes qualitative survey data on consumers' inflation expectations with the multinomial probit model. The results provide evidence that consumers' expectations depend on monetary and fiscal policy data, unemployment rates and pas inflation rates and that consumers' forecast differently during periods of low and high inflation rates. The analysis indicates that the government policy data, especially money growth rates, had a larger impact on the expectations during periods of high inflation. The paper provides support for the hypothesis that expectation formation methods depend on economic conditions. |
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