The Price Is Right: Updating Inflation Expectations in a Randomized Price Information Experiment
Using a unique, randomized information experiment embedded in a survey, this paper investigates how consumers’ inflation expectations respond to new information. We find that respondents, on average, update their expectations in response to (certain types of) information, and do so sensibly, in a ma...
| Main Authors: | , , , , |
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| Other Authors: | |
| Format: | Article |
| Language: | en_US |
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MIT Press
2017
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| Online Access: | http://hdl.handle.net/1721.1/107963 https://orcid.org/0000-0003-1751-9223 |
| _version_ | 1826201860424335360 |
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| author | Armantier, Olivier Topa, Giorgio van der Klaauw, Wilbert Zafar, Basit Nelson, Scott Thomas |
| author2 | Massachusetts Institute of Technology. Department of Economics |
| author_facet | Massachusetts Institute of Technology. Department of Economics Armantier, Olivier Topa, Giorgio van der Klaauw, Wilbert Zafar, Basit Nelson, Scott Thomas |
| author_sort | Armantier, Olivier |
| collection | MIT |
| description | Using a unique, randomized information experiment embedded in a survey, this paper investigates how consumers’ inflation expectations respond to new information. We find that respondents, on average, update their expectations in response to (certain types of) information, and do so sensibly, in a manner consistent with Bayesian updating. As a result of information provision, the distribution of inflation expectations converges toward its center and cross-sectional disagreement declines. We document heterogeneous information processing by gender and present suggestive evidence of respondents forecasting under asymmetric loss. Our results provide support for expectation-formation models in which agents form expectations rationally but face information constraints. |
| first_indexed | 2024-09-23T11:58:02Z |
| format | Article |
| id | mit-1721.1/107963 |
| institution | Massachusetts Institute of Technology |
| language | en_US |
| last_indexed | 2024-09-23T11:58:02Z |
| publishDate | 2017 |
| publisher | MIT Press |
| record_format | dspace |
| spelling | mit-1721.1/1079632022-09-27T23:09:39Z The Price Is Right: Updating Inflation Expectations in a Randomized Price Information Experiment Armantier, Olivier Topa, Giorgio van der Klaauw, Wilbert Zafar, Basit Nelson, Scott Thomas Massachusetts Institute of Technology. Department of Economics Nelson, Scott Thomas Using a unique, randomized information experiment embedded in a survey, this paper investigates how consumers’ inflation expectations respond to new information. We find that respondents, on average, update their expectations in response to (certain types of) information, and do so sensibly, in a manner consistent with Bayesian updating. As a result of information provision, the distribution of inflation expectations converges toward its center and cross-sectional disagreement declines. We document heterogeneous information processing by gender and present suggestive evidence of respondents forecasting under asymmetric loss. Our results provide support for expectation-formation models in which agents form expectations rationally but face information constraints. 2017-04-07T18:55:16Z 2017-04-07T18:55:16Z 2016-07 Article http://purl.org/eprint/type/JournalArticle 0034-6535 1530-9142 http://hdl.handle.net/1721.1/107963 Armantier, Olivier, Scott Nelson, Giorgio Topa, Wilbert van der Klaauw, and Basit Zafar. “The Price Is Right: Updating Inflation Expectations in a Randomized Price Information Experiment.” Review of Economics and Statistics 98, no. 3 (July 2016): 503–523. © 2016 Federal Reserve Bank of New York https://orcid.org/0000-0003-1751-9223 en_US http://dx.doi.org/10.1162/REST_a_00499 Review of Economics and Statistics 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. application/pdf MIT Press MIT Press |
| spellingShingle | Armantier, Olivier Topa, Giorgio van der Klaauw, Wilbert Zafar, Basit Nelson, Scott Thomas The Price Is Right: Updating Inflation Expectations in a Randomized Price Information Experiment |
| title | The Price Is Right: Updating Inflation Expectations in a Randomized Price Information Experiment |
| title_full | The Price Is Right: Updating Inflation Expectations in a Randomized Price Information Experiment |
| title_fullStr | The Price Is Right: Updating Inflation Expectations in a Randomized Price Information Experiment |
| title_full_unstemmed | The Price Is Right: Updating Inflation Expectations in a Randomized Price Information Experiment |
| title_short | The Price Is Right: Updating Inflation Expectations in a Randomized Price Information Experiment |
| title_sort | price is right updating inflation expectations in a randomized price information experiment |
| url | http://hdl.handle.net/1721.1/107963 https://orcid.org/0000-0003-1751-9223 |
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