Title

Household Informedness and Long‐Run Inflation Expectations: Experimental Evidence

Document Type

Journal Article

Role

Author

Standard Number

0038-4038

Journal Title

Southern Economic Association

Volume

85

Issue

2

First Page

580

Last Page

598

Publication Date

2018

Abstract

This article uses an experiment embedded in a survey to analyze the response of consumers' long‐run inflation expectations to information about the Federal Reserve's inflation target and past inflation. On average, respondents revise forecasts toward the 2% target with either information treatment. Forecast uncertainty and heterogeneity decline with the treatments, but remain substantial. Since the information in the treatments is publicly available, these findings are consistent with models of imperfect information in which agents do not fully and continually update their information sets or incorporate all available information into their expectations. Response to treatments varies with prior informedness and with demographic characteristics.

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