Inflation illiteracy – a micro-data analysis

Mostly Economics

Fredrik N. G. Andersson, Erik Hjalmarsson and Pär Österholm of Riksbank analyse what percentage of households that can be considered to be poorly informed about inflation:

Using micro-level survey data from the National Institute of Economic Research’s Economic Tendency Survey, we find that a relatively large share of Swedish households is ill-informed about the rate of inflation in the economy, with perceived and expected rates of inflation deviating substantially from official measures. Probit analysis of the data indicates that such inflation illiteracy is related to respondent characteristics, including income, education and sex. Finally, we show that the treatment
of extreme-value answers has a substantial effect on the aggregated time series typically reported and discussed.

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