Journal Archive

Home > Journal Archive
Cover Image
  • P-ISSN 2586-2995
  • E-ISSN 2586-4130
Cite

KDI Journal of Economic Policy. Vol. 40, No. 3, August 2018, pp. 45-68

https://doi.org/10.23895/kdijep.2018.40.3.45

× KDI Open Access is a program of fully open access journals to facilitate the widest possible dissemination of high-quality research. All research articles published in KDI JEP are immediately, permanently and freely available online for everyone to read, download and share in terms of the Creative Commons Attribution 4.0 International License.

Nexus between Inflation, Inflation Perceptions and Expectations

MINHO NAM; MINJI GO

Author & Article History

Manuscript received 14 June 2018; revision received 25 June 2018; accepted 25 August 2018.

Abstract

We uncover a nexus between actual inflation, inflation perceptions and expectations in Korea through analyzing micro as well as aggregate data from the Consumer Survey. We document two novel findings. First, households’ subjective perceptions of inflation exert more impact on expectation formation than actual inflation. Second, inflation perceptions are broadly in line with the trajectory of the inflation trend. This is attributable to the fact that changes in actual inflation have been generated mainly by the consumption items whose price changes are perceived more sensitively as those items are frequently bought or have a larger share in household expenditures. Conducting a crosscountry comparison, we find that information rigidity in expectation formation process and the nexus between perceptions and expectations of inflation prove to be stronger in Korea. Additionally, we reconfirm the existing finding that the scope of information utilized for forming inflation expectations is fairly circumscribed.

Keywords

Inflation Expectations, Inflation Perceptions, Expectation Formation, Information Rigidity, Monetary Policy

JEL Code

D84, E31, E52

상단으로 이동

KDIJEP