Working Paper: NBER ID: w30046
Authors: Michael Weber; Francesco Dacunto; Yuriy Gorodnichenko; Olivier Coibion
Abstract: Households’ and firms’ subjective inflation expectations play a central role in macroeconomic and intertemporal microeconomic models. We discuss how subjective inflation expectations are measured, the patterns they display, their determinants, and how they shape households’ and firms’ economic choices in the data and help us make sense of the observed heterogeneous reactions to business-cycle shocks and policy interventions. We conclude by highlighting the relevant open questions and why tackling them is important for academic research and policy making.
Keywords: Inflation Expectations; Macroeconomic Models; Economic Choices
JEL Codes: D1; D2; D8; D9; E2; E3; E4; E5; E7; J1
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| subjective inflation expectations (E31) | household spending decisions (D10) |
| subjective inflation expectations (E31) | current consumption (E20) |
| subjective inflation expectations (E31) | firms' pricing decisions (L11) |
| subjective inflation expectations (E31) | wage negotiations (J52) |