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Working Paper
Perceptions and Expectations of Inflation by U.S. Households
Axelrod, Sandor; Lebow, David E.; Peneva, Ekaterina V. (2018-10-25)
To better understand inflation expectations, we examine newly available data on U.S. households' inflation perceptions-what people think inflation has been in the past. The overarching summary is that inflation perceptions look similar to inflation expectations. The central tendencies of the responses for perceived inflation over the past five to ten years are similar to those of expected inflation for the next five to ten years, and all are a little above official estimates of inflation. Thus, survey respondents overall do not expect long-term inflation to change in the future relative to ...
Finance and Economics Discussion Series , Paper 2018-073

Speech
A review of the experience of fielding the Survey of Consumer Expectations
McAndrews, James J. (2014-08-05)
Remarks at the Barclays Global Inflation Conference, New York City.
Speech , Paper 139

Report
Information heterogeneity and intended college enrollment
Bleemer, Zachary; Zafar, Basit (2014-08-01)
Despite a robust college premium, college attendance rates in the United States have remained stagnant and exhibit a substantial socioeconomic gradient. We focus on information gaps? specifically, incomplete information about college benefits and costs?as a potential explanation for these patterns. In a nationally representative survey of U.S. household heads, we show that perceptions of college costs and benefits are severely and systematically biased: 74 percent of our respondents underestimate the true benefits of college (average earnings of a college graduate relative to a non-college ...
Staff Reports , Paper 685

Working Paper
Financial contracting with enforcement externalities
Drozd, Lukasz A.; Serrano-Padial, Ricardo (2016-01-20)
Contract enforceability in financial markets often depends on the aggregate actions of agents. For example, high default rates in credit markets can delay legal enforcement or reduce the value of collateral, incentivizing even more defaults and potentially affecting credit supply. We develop a theory of credit provision in which enforceability of individual contracts is linked to aggregate behavior. The central element behind this link is enforcement capacity, which is endogenously determined by investments in enforcement infrastructure. Our paper sheds new light on the emergence of credit ...
Working Papers , Paper 16-1

Working Paper
The Benefit of Inflation-Indexed Debt: Evidence from an Emerging Bond Market
Christensen, Jens H. E.; Cardozo, Cristhian Hernando Ruiz (2023-02-02)
Portfolio diversification is as important to debt management as it is to asset management. In this paper, we focus on diversification of sovereign debt issuance through greater reliance on inflation-indexed bonds for a representative emerging economy, Colombia. Using an arbitrage-free dynamic term structure model of fixed-coupon and inflation-indexed bond prices, we account for inflation and liquidity risk premia and calculate the net benefit of issuing inflation-indexed bonds over nominal bonds. Our results suggest that the Colombian government could lower its funding costs by as much as ...
Working Paper Series , Paper 2023-04

Working Paper
Is Inflation Default? The Role of Information in Debt Crises
Bassetto, Marco; Galli, Carlo (2017-03-17)
We consider a two-period Bayesian trading game where in each period informed agents decide whether to buy an asset ("government debt") after observing an idiosyncratic signal about the prospects of default. While second-period buyers only need to forecast default, first-period buyers pass the asset to the new agents in the secondary market, and thus need to form beliefs about the price that will prevail at that stage. We provide conditions such that coarser information in the hands of second-period agents makes the price of debt more resilient to bad shocks not only in the last period, but ...
Working Paper Series , Paper WP-2017-6

Working Paper
Indirect Consumer Inflation Expectations: Theory and Evidence
Hajdini, Ina; Knotek, Edward S.; Leer, John; Pedemonte, Mathieu; Rich, Robert W.; Schoenle, Raphael (2022-11-22)
Based on indirect utility theory, we introduce a novel methodology of measuring inflation expectations indirectly. This methodology starts at the individual level, asking consumers about the change in income required to buy the same amounts of goods and services one year ahead. Analytically, our methodology possesses smaller ex-post aggregate inflation forecast errors relative to forecasts based on conventional survey questions. We ask this question in a large-scale, high-frequency survey of consumers in the US and 14 countries, and we show that indirect consumer inflation expectations ...
Working Papers , Paper 22-35

Discussion Paper
What Are Consumers’ Inflation Expectations Telling Us Today?
Armantier, Olivier; Goldman, Leo; Koşar, Gizem; Topa, Giorgio; Van der Klaauw, Wilbert; Williams, John C. (2022-02-14)
The United States has experienced a considerable rise in inflation over the past year. In this post, we examine how consumers’ inflation expectations have responded to inflation during the pandemic period and to what extent this is different from the behavior of consumers’ expectations before the pandemic. We analyze two aspects of the response of consumers’ expectations to changing conditions. First, we examine by how much consumers revise their inflation expectations in response to inflation surprises. Second, we look at the pass-through of revisions in short-term inflation ...
Liberty Street Economics , Paper 20220214

Working Paper
Aggregate Implications of Heterogeneous Inflation Expectations: The Role of Individual Experience
Pedemonte, Mathieu; Toma, Hiroshi; Verdugo, Estaban (2023-01-10)
We show that inflation expectations are heterogeneous and depend on past individual experiences. We propose a diagnostic expectations-augmented Kalman filter to represent consumers’ heterogeneous inflation expectations-formation process, where heterogeneity comes from an anchoring-to-the-past mechanism. We estimate the diagnosticity parameter that governs the inflation expectations-formation process and show that the model can replicate systematic differences in inflation expectations across cohorts in the US. We introduce this mechanism into a New Keynesian model and find that ...
Working Papers , Paper 23-04

Journal Article
The role of expectations in the FRB/US macroeconomic model
Mauskopf, Eileen; Reifschneider, David L.; Tinsley, Peter A.; Williams, John; Brayton, Flint (1997-04)
In the past year, the staff of the Board of Governors of the Federal Reserve System began using a new macroeconomic model of the U.S. economy referred to as the FRB/US model. This system of mathematical equations, describing interactions among economic measures such as inflation, interest rates, and gross domestic product, is one of the tools used in economic forecasting and the analysis of macroeconomic policy issues at the Board. The FRB/US model replaces the MPS model, which, with periodic revisions, had been used at the Federal Reserve Board since the early 1970s. A key feature of the new ...
Federal Reserve Bulletin , Volume 83 , Issue Apr

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