Lovisa Reiche

De Nederlandsche Bank Doi: https://www.dnb.nl/publicaties/publicaties-onderzoek/working-paper-2025/852-who-s-on-fire-household-characteristics-and-the-formation-of-inflation-expectations/

We study how consumers form and revise inflation expectations using a unique, highly balanced monthly panel of Dutch households. We develop a Bayesian frame-work that nests Full-Information Rational Expectations (FIRE) alongside common forecasting heuristics and test it by recovering person-specific belief-updating rules from individual time-series regressions. Our novel individual-level design reveals sub-stantial heterogeneity in how households process information over time. On average, consumers systematically overreact to current inflation, echoing patterns found for pro-fessional forecasters. Only 2.5 percent, predominantly wealthier, more educated men, behave consistently with FIRE. Most consumers rely on simple heuristics, especially adaptive expectations. Our results show that heuristic learning, not FIRE, character-izes expectation formation for the vast majority of households. Crucially, heterogeneity in belief updating is both large and systematic.

Norges Bank Doi: https://www.norges-bank.no/en/news-events/publications/Working-Papers/2025/wp-7/

We establish five facts of how households, firms, social partners (employer organizations and trade unions), and economists (professional forecasters and academics) form inflation expectations using data from a harmonized survey over the same time period from Norway having data both pre and post inflation surge: (i) Households’ inflation expectations are typically the highest, followed by firms but the latter groups’ average expectations exceeded those of households starting in 2022, whereas social partners and economists form expectations similarly; (ii) a similar pattern arises for disagreement with firms’ disagreement surpassing households’ in 2022 with important roles for sales and purchasing prices forecasts; (iii) in normal times, we observe a flat term structure of inflation expectations but it became negatively sloped during 2022, especially for households; economists working in financial institutions have the most anchored expectations; (iv) the pass through of inflation expectations to wage growth expectations is substantially below 1 for all agents but increased substantially for firms and economists during the inflation surge; (v) we causally link electricity price shocks to inflation expectations and find a large pass through.

ifo Institute Doi: https://www.ifo.de/DocDL/cesifo1_wp11588.pdf

The gender gap in inflation expectations, women reporting systematically higher expectations in consumer surveys, has been attributed to traditional gender norms, and thus women’s greater exposure to volatile food prices. This explanation overlooks a crucial factor: forecasting confidence. Using data from German households, I show that forecast confidence can fully explain the gender gap and the “grocery shopping” effect occurs only among those with low confidence. The interaction of confidence and shopping experience can be explained through the lens of a simple Bayesian learning framework, where noisy signals (such as price volatility) only increase mean expectations when priors are imprecise (forecast confidence is low).

University of Oxford Doi: https://ora.ox.ac.uk/objects/uuid:c0d32c31-0512-4025-a290-bc588870f59e/files/s7p88ck123

How does the gender wage gap respond to inflation? We show that it widens after both supply- and demand-driven inflationary shocks. This widening reflects gender differences in labor market perceptions: women interpret inflation as a signal of deteriorating conditions, while men perceive mild improvement. These divergent beliefs reduce women’s willingness to pursue higher wages, slowing their nominal wage growth relative to men’s. To formalize this mechanism, we develop a New Keynesian search-and-matching model where workers do not observe the true nature of the shock and women form ambiguity averse beliefs. The model replicates the observed cyclicality of the gender wage gap, establishing a novel link between inflation and gender inequality.