Imperfect Information and Consumer Inflation Expectations: Evidence from Microdata
Oxford Bulletin of Economics and Statistics
Published online on May 22, 2017
Abstract
This paper explores which factors trigger an adjustment in consumers’ inflation expectations and looks at the implications regarding forecast errors. We find support for imperfect information models, as inflation volatility and news trigger an adjustment in expectations. Furthermore, we document that individual expectations become more accurate if they have been adjusted.