Search

This project aims to test in a controlled experimental setting whether aspiration goods, i.e. goods that have not been purchased despite being highly desired, influence the formation of inflation perceptions and expectations. Respondents are randomly assigned to one of 4 experimental conditions resulting from asking the respondents to list 3 goods that in the last 6 months a) have been the most desired Vs. not particularly desired b) have been purchased Vs. not. We then elicit inflation perceptions (past 12 months) and inflation expectations (next 12 months) for all respondents. The combination of being mostly desired and not having been purchased characterizes the aspiration goods and represents our treatment condition. We expect to find that inflation perceptions/expectations are higher in the treatment group. The underlying hypothesized mechanism is that the mismatch between desired and purchased goods can be attributed to a loss of the purchasing power of the currency. The 2x2 factorial design allows us also to investigate how removing only one of the two features (desirability and non-availability) compares with a baseline.

We study the behavior of U.S. consumers' inflation expectations during the high inflation period of 2021-22 using data from the Survey of Consumer Expectations. Short- and, to a lesser extent, mediumterm inflation expectations rose as inflation surged in 2021. Disagreement and uncertainty about future inflation increased significantly. Then, in 2022, even as inflation continued to climb, medium- and longerterm inflation expectations unexpectedly fell and medium- and longer-term deflation expectations increased. We find that respondents with deflation expectations tend to expect prices to mean revert and are more optimistic about the economic outlook.

This paper studies how inflation beliefs reported in the New York Fed's Survey of Consumer Expectations have evolved since the start of the COVID-19 pandemic. We find that household inflation expectations responded slowly and mostly at the short-term horizon. In contrast, the data reveal immediate and unprecedented increases in individual inflation uncertainty and in inflation disagreement across respondents. We find evidence of a strong polarization in inflation beliefs and we show differences across demographic groups. Finally, we document a strong link, consistent with precautionary saving, between inflation uncertainty and how respondents used the stimulus checks they received as part of the 2020 CARES Act.