Chapter 24: Heterogeneity of Inflation Expectations: An Analysis Using IESH Data

The authors model heterogeneity of inflation expectations across Indian households using the Inflation Expectations Survey of Households data set. Using Carroll-type epidemiological models and pooled cross sectional analyses, the authors find that women, homemakers, older people and Tier 2 and 3 city dwellers tend to have higher inflation expectations compared to their counterparts. In the epidemiological model-based analysis, these very cohorts display higher speed of adjustment to news. Overall higher relative adjustment speeds point to the significance of central bank communications.