Using a large, nationally representative survey of US consumers, we estimate a causal 20 percent pass-through from inflation expectations to income growth expectations for the average consumer, with considerable heterogeneity in pass-through associated with sociodemographic factors. The results...

We explore the implications of heterogeneous, history-dependent inflation expectations in a general equilibrium setting. We propose an experience-based expectations-augmented Kalman filter to represent consumers' heterogeneous inflation expectations, where heterogeneity arises from an...

This paper uses data on 5-year gasoline price expectations from the US Michigan Survey of Consumers to investigate their role as a transmission channel for gasoline price shocks. Specifically, a Structural VAR model is estimated to carry out counterfactual analysis which shows that gasoline...

Since 2021, the inflation rate in Germany and the euro area has increased significantly. At the same time, there are increasing signs of ``de-anchoring'' of inflation expectations in Germany. This paper - building on the approach of Andre et al. (2022) - examines in a pilot study survey-based...

Poor households report significantly higher inflation expectations than rich households. We assess, both theoretically and empirically, whether these differences are due to the recall of different shopping experiences and of information about aggregate inflation. Using data on shopping...

We show that inflation expectations are heterogeneous and depend on past individual experiences. We propose a diagnostic expectations-augmented Kalman filter to represent consumers’ heterogeneous inflation expectations-formation process, where heterogeneity comes from an anchoring-to-the-past...

Barsky and Sims (2012, AER) demonstrated, via indirect inference, that confidence innovations can be viewed as noisy signals about medium-term economic growth. They highlighted that the connection between confidence and subsequent activity, such as consumption and output, is primarily driven by...

Deviations of market participants forecasts from full-information rational expectations (FIRE) are usually specified to arise from limited information or irrationality. Relying on a novel theoretical characterization, we present empirical evidence that these specifications are inconsistent with...

Barsky and Sims (2012, AER) demonstrated, via indirect inference, that confidence innovations can be viewed as noisy signals about medium-term economic growth. They highlighted that the connection between confidence and subsequent activity, such as consumption and output, is primarily driven by...

The uncertainty of U.S. core inflation, measured by the stochastic volatility of forecast errors, has soared to a level not seen in nearly five decades since the COVID-19 pandemic hit the global economy. Prices, consumption, and production increase after a positive shock to core inflation...