Inflation Expectations, Learning, and Supermarket Prices: Evidence from Survey Experiments
Name
mac.20150147.pdf
Description
Published version
Size
927.58 KB
Format
Adobe PDF
Checksum (MD5)
a21dbc9020aa3895cff3fe7bdf1e1a22
Author(s)
Cavallo, Alberto F.
Cruces, Guillermo
Perez-Truglia, Ricardo
Date Issued
July 2017
Journal
American Economic Journal: Macroeconomics
Publisher
American Economic Association
Citation
Cavallo, Alberto et al. "Inflation Expectations, Learning, and Supermarket Prices: Evidence from Survey Experiments." American Economic Journal: Macroeconomics 9, 3(July 2017): 1-35
Version
Final published version
Abstract
Information frictions play a central role in the formation of household inflation expectations, but there is no consensus about their origins. We address this question with novel evidence from survey experiments. We document two main findings. First, individuals in low inflation contexts have significantly weaker priors about the inflation rate. This finding suggests that rational inattention may be an important source of information frictions. Second, cognitive limitations also appear to be a source of information frictions: even when information about inflation statistics is available, individuals still place a significant weight on inaccurate sources of information, such as their memories of the price changes of the supermarket products they purchase. We discuss the implications of these findings for macroeconomic models and policymaking.
MIT Department
Sloan School of Management
Terms of Use
Article is made available in accordance with the publisher's policy and may be subject to US copyright law. Please refer to the publisher's site for terms of use.
Persistent DSpace Link
DOI of Published Version
https://doi.org/10.1257/mac.20150147
