Assessing reliability of aggregated inflation views in the European Commission consumer survey

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Title: Assessing reliability of aggregated inflation views in the European Commission consumer survey
Author: Stanisławska, Ewa ; Paloviita, Maritta ; Łyziak, Tomasz
Organization: Bank of Finland
Series: Bank of Finland Research Discussion Papers
Series number: 10/2019
Year of publication: 2019
Publication date: 5.7.2019
Published in: Published in Economics Letters 2021 ; 206 ; September "Consumer inflation views : micro-level inconsistencies and macro-level measures"
Pages: 40
Subject (yso): inflaatio; odotukset; EU-maat; kuluttajat; kuluttajatutkimus; hinnat
Keywords: inflaatio-odotukset; Puola; Suomi
JEL: C11; C53; Q43; Q47
Other keywords: inflation expectations; European Union; consumer survey
Abstract: Using a novel approach based on micro-level survey responses, we assess the reliability of aggregated inflation expectations estimates in the European Commission Consumer Survey. We identify the share of consumers, whose qualitative and quantitative views on expected increase of prices do not match each other. Then we consider the impact of inconsistent survey responses on balance statistics and mean values of quantitative inflation expectations. We also analyze expectations’ formation estimating the sticky-information models. The results, based on Finnish and Polish data, suggest that even if the fraction of inconsistent survey responses is non-negligible, it matters neither for the aggregated figures of inflation views, nor for understanding of the formation of inflation expectations by consumers. We conclude that micro-level inconsistencies do not reduce the reliability of the current EC Consumer Survey dataset. Our results also indicate that inconsistent responses are not important drivers of the inflation overestimation bias displayed in the data.

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