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Inflationsförväntningar och konsumtionsattityd - fattar Sveriges befolkning informerade beslut?

Bolin, Sofia LU and Löf, Alexandra LU (2014) NEKN05 20141
Department of Economics
Abstract
This paper examines the relationship between inflation expectations and consumption attitude regarding durable goods. It does so using cross-sectional data on Swedish households collected on behalf of Konjunkturinstitutet. We use an ordered probit model, with a number of controls, to obtain estimates of the aforementioned relationship. In contrast to established macroeconomic assumptions, our result shows a weak, slightly negative link between inflation expectations and consumption. We see that a one percent increase in expected inflation leads to a reduction of 0.44 percent in the probability that households find it favorable to consume durable goods today. One possible explanation for this result could be that there is a lack in... (More)
This paper examines the relationship between inflation expectations and consumption attitude regarding durable goods. It does so using cross-sectional data on Swedish households collected on behalf of Konjunkturinstitutet. We use an ordered probit model, with a number of controls, to obtain estimates of the aforementioned relationship. In contrast to established macroeconomic assumptions, our result shows a weak, slightly negative link between inflation expectations and consumption. We see that a one percent increase in expected inflation leads to a reduction of 0.44 percent in the probability that households find it favorable to consume durable goods today. One possible explanation for this result could be that there is a lack in communication regarding inflation from policy makers to the public. We also reason that the negative relationship may be the result of the income effect dominating the intertemporal substitution effect. This would imply that individuals are prudent and reasonable and thus prefer to “insure” themselves against future lower purchasing power by reducing current spending on durables. (Less)
Please use this url to cite or link to this publication:
author
Bolin, Sofia LU and Löf, Alexandra LU
supervisor
organization
course
NEKN05 20141
year
type
H1 - Master's Degree (One Year)
subject
keywords
inflationsförväntningar, kapitalvaror, konsumtionsattityd
language
Swedish
id
4467729
date added to LUP
2014-06-26 15:03:19
date last changed
2014-06-26 15:03:19
@misc{4467729,
  abstract     = {{This paper examines the relationship between inflation expectations and consumption attitude regarding durable goods. It does so using cross-sectional data on Swedish households collected on behalf of Konjunkturinstitutet. We use an ordered probit model, with a number of controls, to obtain estimates of the aforementioned relationship. In contrast to established macroeconomic assumptions, our result shows a weak, slightly negative link between inflation expectations and consumption. We see that a one percent increase in expected inflation leads to a reduction of 0.44 percent in the probability that households find it favorable to consume durable goods today. One possible explanation for this result could be that there is a lack in communication regarding inflation from policy makers to the public. We also reason that the negative relationship may be the result of the income effect dominating the intertemporal substitution effect. This would imply that individuals are prudent and reasonable and thus prefer to “insure” themselves against future lower purchasing power by reducing current spending on durables.}},
  author       = {{Bolin, Sofia and Löf, Alexandra}},
  language     = {{swe}},
  note         = {{Student Paper}},
  title        = {{Inflationsförväntningar och konsumtionsattityd - fattar Sveriges befolkning informerade beslut?}},
  year         = {{2014}},
}