Implied inflation expectations
Bolyachin Y., Voinova A., Krotova J., Penikas H., Potashev N., Sviridova S., Sergeeva K., Snegireva O., Stroeva H., Sukmanova N.
Implied inflation expectations are the expectation values derived from the question about particular goods’ prices or the values of a basket of goods. We use internal and external surveys to compare implied and direct (conventional) estimates when the single inflation range is chosen in the latter case. By checking against the known stylized facts about inflation expectations, we compare all the combinations of question about them. We find that implied perceived inflation and inflation expectations are higher than their direct peers. Estimates from the more complicated questions when the burden of expectations’ derivations falls over the interviewer, is typically lower than those from the simpler ones. We conclude that inflation expectations from the questions related to particular goods’ prices are more mindful, but raise more complexity due to the present of multitude of goods and services’ specifications. Questions on implied inflation expectations in the form of the basket value might appeal to certain respondents, though result in higher expectation values and might capture the income effect (situation when the basket values increases/decreases as a result of the similar changes in respondent’s income given no changes in the prices of goods themselves). This is why we suggest to ask a question about a basket of goods with no specific value at the start, and consider only responses of those with no past or expected future changes in welfare as the aggregate inflation expectations’ value. The values obtained so far might be of use to consider in combination with the direct estimates in the future.