Working Papers present research work by both Danmarks Nationalbank’s employees and our partners. Working Papers are primarily targeted at professionals and people with an interest in central banking research as well as economics and finance in a broader sense.
Working Paper: Greater than the sum of its parts: aggregate vs aggregated inflation expectations
This paper introduces a novel measure of consumer inflation expectations: We elicit and combine inflation forecasts across categories of personal consumption expenditure to form an aggregated measure of inflation expectations. Drawing on answers from nearly 60,000 respondents, our data cover the early low-inflation environment of the covid-19 pandemic and the 2021 inflation surge. Conventionally elicited inflation expectations consistently exceed aggregated measures constructed under plausible weighting schemes. Aggregated measures display less disagreement and volatility and are stronger predictors of consumers’ spending plans. The relative informational value of aggregated measures rises with the individual-level gap between conventional and aggregated inflation expectations. Our results chart a new course for designing measures of inflation expectations.