Inflation literacy and inflation expectations: Evidence from Austrian household survey dataFabio Rumler and María Teresa Valderrama Economic Modelling, 2020, vol. 87, issue C, 8-23 Abstract: Inflation expectations are known to be quite heterogeneous across agents. We investigate whether this heterogeneity is primarily due to differences in people’s understanding of the inflation process and of the goals and intentions of the central bank. Using micro data from a survey conducted among 2000 Austrian households, we construct an indicator of “inflation literacy” from several questions on people’s knowledge about different aspects of inflation. We find that this indicator helps explain both the level and the uncertainty of inflation expectations: Households with relatively higher levels of inflation literacy tend to have lower and more accurate short-term and long-term inflation expectations. Interestingly, however, they are less certain about their inflation expectations than people with lower levels of inflation literacy. We also find that people’s trust in the central bank and in its ability to maintain price stability significantly dampens their inflation expectations. Keywords: Inflation expectations; Economic literacy; Uncertainty of inflation expectations; Central bank reputation; Survey data (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:87:y:2020:i:c:p:8-23 DOI: 10.1016/j.econmod.2019.06.016 Access Statistics for this article Economic Modelling is currently edited by S. Hall and P. Pauly More articles in Economic Modelling from Elsevier |
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