Expectations of Inflation: The Role of Demographic Variables,Expectation Formation,and Financial Literacy |
| |
| Authors: | WÄNDI BRUINE de BRUIN WILBERT VANDERKLAAUW JULIE S DOWNS BARUCH FISCHHOFF GIORGIO TOPA OLIVIER ARMANTIER |
| |
| Institution: | 1. Wändi Bruine de Bruin (wandi@cmu.edu) is an Assistant Professor in the Department of Social and Decision Sciences and the Department of Engineering and Public Policy of Carnegie Mellon University;2. Wilbert VanderKlaauw (Wilbert.VanDerKlaauw@ny.frb.org) is Vice President of the Federal Reserve Bank New York;3. Julie S. Downs (downs@cmu.edu) is an Assistant Research Professor of Social and Decision Sciences at Carnegie Mellon University;4. Baruch Fischhoff (baruch@cmu.edu) is the Howard Heinz University Professor in the Department of Social and Decision Sciences and the Department of Engineering and Public Policy of Carnegie Mellon University;5. Giorgio Topa (Giorgio.Topa@ny.frb.org) is the Assistant Vice President and Head of the Microeconomic and Regional Studies Function, Research and Statistics Group of the Federal Reserve Bank New York;6. Olivier Armantier (Olivier.Armantier@ny.frb.org) is a Research Officer in the Microeconomic and Regional Studies Function, Research and Statistics Group, of the Federal Reserve Bank New York. |
| |
| Abstract: | When financial decisions have consequences beyond the immediate future, individuals' economic success may depend on their ability to forecast the rate of inflation. Higher inflation expectations have been reported by individuals who are female, poorer, single and less educated. Our results suggest that these demographic differences in inflation expectations may be partially explained by variations in expectation formation and financial literacy. Specifically, higher inflation expectations were reported by individuals who focused more on how to cover their future expenses and on prices they pay (rather than on the US inflation rate) and by individuals with lower financial literacy. |
| |
| Keywords: | |
|
|
