What determines households inflation expectations? Theory and evidence from a household survey

摘要

The purpose of the present paper is to study how households form inflation expectations using a novel survey dataset of Italian households. We extend the existing 'inattentive-ness' literature by incorporating explicitly inflation targets and distinguishing between aggregate and disaggregate dynamics based on demographic groups. We also consider both the short- and long-run dynamics as households update their inflation expectations. While we find clear distinctions between the various demographic groups behavior, households tend to absorb professionals forecast. The short-run dynamics also indicate they not only overreact when updating their expectations but also adjust asymmetrically to any perceived momentum change of future inflation.