Abstract:
In this paper, we evaluate households’ views on their expectations regarding future inflation and future nominal interest rates. We ask whether households think the level of expected inflation or interest rates will be appropriate, too high or too low. Moreover, we ask them for reasons why they think higher or lower inflation or nominal interest rates would be better. The reasons we provide give insights about households’ views on the monetary policy path they expect, on macroeconomic issues they find particularly important and also provide a way to measure households’ understanding of basic macroeconomic relationships, such as the Fisher equation. Our research question is evaluated using a new survey dataset coming from the Bundesbank Pilot Survey on Consumer Expectations, which is fielded on a representative sample of German households in early 2019.