Perceptions and expectations of price changes and inflation: A review and conceptual framework

Ranyard, Rob; Missier, Fabio Del; Bonini, Nicolao; Duxbury, Darren; Summers, Barbara

doi:10.1016/j.joep.2008.07.002

Cited by 134 publications

(118 citation statements)

References 67 publications

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“…17 These findings are consistent with the evidence cited in the survey article by Ranyard et al (2008) indicating that people have some elementary knowledge of inflation that should be sufficient to answer questions about the 'rate of inflation'.…”

Section: (12) Alternative Inflation Measuressupporting

confidence: 73%

“…16 Such differential interpretations could possibly lead to reporting different expectations. Indeed, if increasing prices are more salient than decreasing prices (as suggested in a review by Ranyard et al, 2008), respondents who come up with examples of salient prices may inadvertently be biased to give higher responses than those who just think of the inflation rate, when answering Michigan's question about "prices in general".…”

Section: (12) Alternative Inflation Measuresmentioning

confidence: 99%

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Rethinking the Measurement of Household Inflation Expectations: Preliminary Findings

et al. 2008

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractThis paper reports preliminary findings from a Federal Reserve Bank of New York research program aimed at improving survey measures of inflation expectations. We find that seemingly small differences in how inflation is referred to in a survey can lead respondents to consider significantly different price concepts. For near-term inflation, the "prices in general" question in the monthly Reuters/University of Michigan Surveys of Consumers can elicit responses that focus on the most visible prices, such as gasoline or food. Questions on the "rate of inflation" can lead to responses on the prices that U.S. citizens pay in general-an interpretation, or concept, closer to the definition of inflation that economists have in mind; they also lead to both lower levels of reported inflation and to lower disagreement among respondents. In addition, we present results associated with new survey questions that assess the degree of individual uncertainty about future inflation outcomes as well as future expected wage changes. Finally, using the panel dimension of the surveys, we find that individual responses exhibit considerable persistence, both in the expected level of inflation and in forecast uncertainty. Respondents who are more uncertain make larger revisions to their expectations in the next survey.

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Section: (12) Alternative Inflation Measuressupporting

confidence: 73%

Section: (12) Alternative Inflation Measuresmentioning

confidence: 99%

Rethinking the Measurement of Household Inflation Expectations: Preliminary Findings

et al. 2008

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“…Indeed, Sims (2003) emphasizes the presence of information-processing constraints that could be compatible with such ine¢ ciencies. Finally, it is well known that consumer in ‡ation perceptions are shaped -in line with the availability heuristic (Tversky and Kahneman, 1974) -by frequently purchased items (Ranyard, Missier, Bonini, Duxbury, and Summers, 2008), such that in periods where in ‡ation of such items is high, consumers might be more aware and concerned about in ‡ation, whereas media reporting (which most likely is generally concerned with overall in ‡ation) need not be more intense.…”

Section: News On In ‡Ationmentioning

confidence: 99%

“…In ‡ation expectations are also determined by the in ‡ation that consumers actually experience -…rst, in ‡ation expectations are shaped much more by the in ‡ation rate of consumption baskets that relate to the respective socio-economic group to which the individual belongs than by the overall in ‡ation indices, at least for low-education and low-income consumers (Pfajfar and Santoro, 2009;Menz and Poppitz, 2013); second, in ‡ation expectations vary positively with the in ‡ation experience that individuals have undergone over their lifetime (Lombardelli and Saleheen, 2003;Malmendier and Nagel, 2013); third, more frequently purchased items have been found to have a higher impact on in ‡ation perceptions and in ‡ation expectations (Ranyard, Missier, Bonini, Duxbury, and Summers, 2008;Georganas, Healy, and Li, 2014).…”

Section: Introductionmentioning

confidence: 99%

Consumers' Attitudes and Their Inflation Expectations

Ehrmann

Pfajfar

Santoro

2015

FEDS

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This paper studies consumers'in ‡ation expectations using micro-level data from the Surveys of Consumers conducted by University of Michigan. It shows that beyond the well-established socio-economic factors such as income, age or gender, other characteristics such as the households'…nancial situation and their purchasing attitudes are important determinants of their forecast accuracy. Respondents with current or expected …nancial di¢ culties, pessimistic attitudes about major purchases, or expectations that income will go down in the future have a stronger upward bias in their expectations than other households. However, their bias shrinks by more than that of the average household in response to increasing media reporting about in ‡ation. Equivalent results are found during recessions.JEL classi…cation: C53, D84, E31

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“…In this respect, a self-fulfilling prophecy appears to apply, such that the actual state of the economy is decided by consumer psychology. Ranyard et al (2008) proposed a psychological framework based on the recognition or expectation of changes in commodity prices, which is perceived to guide personal economic activities such as consumption or saving. Personal economic activities are influenced by perceptions of current commodity prices or expectations regarding future prices.…”

Section: Introductionmentioning

confidence: 99%

Asymmetrical corporate responses to economic information: Applying the firm size effect

2016

J. adm. bus. stud.

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Perceptions and expectations of price changes and inflation: A review and conceptual framework

Cited by 134 publications

References 67 publications

Rethinking the Measurement of Household Inflation Expectations: Preliminary Findings

Rethinking the Measurement of Household Inflation Expectations: Preliminary Findings

Consumers' Attitudes and Their Inflation Expectations

Asymmetrical corporate responses to economic information: Applying the firm size effect

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