Inflation Expectations and Risk Preferences
Autor: Lena Dräger, Maximilian Floto, Marina Schröder
Nummer: 726, Mar 2025, pp. 73
JEL-Class: E52, E31, D84, D90
Abstract:
We provide evidence for biases in inflation expectations, where risk-averse households and experts report significantly higher prior inflation expectations. Using a survey randomized control trial (RCT), we can show that information about inflation forecasts closes this expectations gap. Our results are in line with a framework where risk averse agents seek to overestimate inflation in order to maximize future utility. We can show that biases in inflation expectations seem to be related to physical information avoidance, rather than biases in information processing.
Zusammenfassung:
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