The purpose of this paper is to investigate the microfoundations of how non-experts’ (or general public) form inflation expectations. Using a unique dataset we investigate the range of near rational inflation expectations. An important contribution to understanding how non-experts form their...

The purpose of the present paper is to study how households form inflation expectations. Using a novel survey-base dataset of Italian households’ opinions of inflation we investigate two separate, but related, types of behavior: ‘inattentiveness’ and ‘anchoring’. The present analysis...

The purpose of the present paper is to investigate the structure and dynamics of professionals' forecast of inflation. Recent papers have focused on their forecast errors and how they may be affected by informational rigidities, or inattentiveness. In this paper we extend the existing literature...

The purpose of the present paper is to study how households form inflation expectations using a novel survey dataset of Italian households. We extend the existing ‘inattentiveness’ literature by incorporating explicitly inflation targets and distinguishing between aggregate and disaggregate...

We evaluate the usefulness of the Hodrick-Prescott (HP) filter as a proxy for rational expectations, using long runs of annual US inflation data. Our conclusion is that while the HP series are not fully rational in the sense of Muth (1961), they do generally meet the criterion of `weak...

This paper outlines a model where a household forms subjective expectations about his income by 'anchoring' on a professional's forecasts of the aggregate economy. Hence, the household is able to form relative (or real) income expectations. However, he observes the professional's forecasts...