Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/252119 
Year of Publication: 
2022
Series/Report no.: 
CESifo Working Paper No. 9602
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
Inflation expectations are central to economics because they affect the effectiveness of fiscal and monetary policy as well as realized inflation. We survey the recent literature with a focus on the inflation expectations of households. We first review standard data sources and discuss their advantages and disadvantages. We then document that household inflation expectations are biased upwards, dispersed across individuals, and volatile in the time series. We also provide evidence of systematic differences by gender, income, education, and race. Turning to the underlying expectations formation process, we highlight the role of individuals' exposure to price signals in their daily lives, such as price changes in groceries, the role of lifetime experiences, and the role of cognition. We then discuss the literature that links inflation expectations to economic decisions at the individual level, including consumption-savings and financial decisions. We conclude with an outlook for future research.
Subjects: 
beliefs formation
heterogeneous agents
macroeconomics with micro data
inflation exposure
experience effects
financial sophistication
JEL: 
C90
D14
D84
E31
E52
E71
G11
Document Type: 
Working Paper
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