Book contents
- The Behavioral Economics of Inflation Expectations
- The Behavioral Economics of Inflation Expectations
- Copyright page
- Dedication
- Contents
- Figures
- Tables
- Preface
- 1 Patterns and Expectations
- 2 Extrapolation and Expectations
- 3 Eliciting Expectations under Laboratory Conditions
- 4 Features of the Laboratory Data
- 5 Similarity Matching and Scaling the Experimental Data
- 6 Pattern Extrapolation and Expectations Measured by Consumer Surveys
- 7 Heterogeneity and Uncertainty of Inflation Expectations
- 8 Inflation Dynamics
- 9 Explaining the Course of Interest Rates
- 10 Generalizing the Pattern-Based Approach
- 11 A Detour to Income Expectations
- 12 The Fisher Effect in Historical Times
- 13 Expectations of High Inflation
- 14 The Fisher Effect in Asian Economies
- 15 The Fisher Effect in African Economies
- 16 Estimates of Expected Inflation for Major Economies
- 17 Estimates of Expected Real Interest Rates for Major Economies
- Epilogue
- References
- Index
7 - Heterogeneity and Uncertainty of Inflation Expectations
Published online by Cambridge University Press: 24 July 2020
- The Behavioral Economics of Inflation Expectations
- The Behavioral Economics of Inflation Expectations
- Copyright page
- Dedication
- Contents
- Figures
- Tables
- Preface
- 1 Patterns and Expectations
- 2 Extrapolation and Expectations
- 3 Eliciting Expectations under Laboratory Conditions
- 4 Features of the Laboratory Data
- 5 Similarity Matching and Scaling the Experimental Data
- 6 Pattern Extrapolation and Expectations Measured by Consumer Surveys
- 7 Heterogeneity and Uncertainty of Inflation Expectations
- 8 Inflation Dynamics
- 9 Explaining the Course of Interest Rates
- 10 Generalizing the Pattern-Based Approach
- 11 A Detour to Income Expectations
- 12 The Fisher Effect in Historical Times
- 13 Expectations of High Inflation
- 14 The Fisher Effect in Asian Economies
- 15 The Fisher Effect in African Economies
- 16 Estimates of Expected Inflation for Major Economies
- 17 Estimates of Expected Real Interest Rates for Major Economies
- Epilogue
- References
- Index
Summary
In previous chapters, we have focused on the mean of inflation expectations. Thus, we have answered the question, for example, where the average person sees the price level a year hence. Here we want to turn to further dimensions of expectations. In particular, it is obvious that people differ with respect to their expectations. Clearly, the standard rational expectations hypothesis is silent regarding expectations heterogeneity. It assumes that all agents use the same relevant information. The expectations model of Mankiw et al. (2003) is an interesting departure from the standard model. These authors propose that only a fraction of the public makes an informed forecast at any point in time. The rest stick to the expectations they have formed earlier. This approach is similar to the model already discussed by Carroll (2003) where experts play the role of providing informed forecasts. Again, the model of pattern-based expectations offers a clear alternative.
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- The Behavioral Economics of Inflation ExpectationsMacroeconomics Meets Psychology, pp. 78 - 84Publisher: Cambridge University PressPrint publication year: 2020