Inflation Expectations and Behavior: Do Survey Respondents Act on Their Beliefs?
Abstract: Surveys of consumers’ inflation expectations are now a key component of monetary policy. To date, however, little work has been done on 1) whether individual consumers act on their beliefs about future inflation, and 2) whether the inflation expectations elicited by these surveys are actually informative about the respondents’ beliefs. In this post, we report on a new study by Armantier, Bruine de Bruin, Topa, van der Klaauw, and Zafar (2010) that investigates these two issues by comparing consumers’ survey-based inflation expectations with their behavior in a financially incentivized experiment. We find that the decisions of survey respondents are generally consistent with their stated inflation beliefs.
JEL Classification: D14;
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Provider: Federal Reserve Bank of New York
Part of Series: Liberty Street Economics
Publication Date: 2011-07-27