Households' probabilistic inflation expectations in high-inflation regimes

Becker, Christoph ; Duersch, Peter ; Eife, Thomas A. ; Glas, Alexander

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URN: urn:nbn:de:bsz:180-madoc-667298
Document Type: Working paper
Year of publication: 2023
The title of a journal, publication series: ZEW Discussion Papers
Volume: 23-072
Place of publication: Mannheim
Publication language: English
Institution: Sonstige Einrichtungen > ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
School of Law and Economics > Sonstige - Fakultät für Rechtswissenschaft und Volkswirtschaftslehre
MADOC publication series: Veröffentlichungen des ZEW (Leibniz-Zentrum für Europäische Wirtschaftsforschung) > ZEW Discussion Papers
Subject: 330 Economics
Classification: JEL: D84 , E31 , E58,
Keywords (English): probabilistic expectations , inflation , survey data
Abstract: Central bank surveys frequently elicit households’ probabilistic beliefs about future inflation. However, most household surveys use a response scale that is tailored towards low-inflation regimes. Using data from a randomized controlled trial included in the Bundesbank Online Panel Households, we show (i) that keeping the original scale in high-inflation regimes distorts estimates of histogram moments and forces households to provide probabilistic expectations that are inconsistent with the point forecasts and (ii) how shifting the scale improves the consistency of predictions by allowing respondents to state more detailed beliefs about higher inflation ranges. We also explore potential disadvantages of adjusting the response scale.

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