Endogenous expectation formation methods: Evidence from consumers' inflation expectations

This paper analyzes qualitative survey data on consumers' inflation expectations with the multinomial probit model. The results provide evidence that consumers' expectations depend on monetary and fiscal policy data, unemployment rates and pas inflation rates and that consumers' forecast differently during periods of low and high inflation rates. The analysis indicates that the government policy data, especially money growth rates, had a larger impact on the expectations during periods of high inflation. The paper provides support for the hypothesis that expectation formation methods depend on economic conditions.