Learning Under Multiple Information Sets (JMP)

Abstract: This paper analyses how individuals form inflation expectations under information uncertainty. Using evidence from a period with multiple public inflation statistics and an increase in relative price dispersion (Argentina, 2007-2011), I show that individuals use their own inflation experience- based on the change in prices of the goods they purchase- to form inflation expectations. More specifically, the inflation expectations of lower-income households, who experienced higher average household-specific rates of inflation, were higher. I characterize inflation experience by using daily (online) data on prices and expenditure information for roughly 25,000 households to construct household-specific price indexes. To disentangle the effect of information uncertainty from price dispersion, I model expectations through a Bayesian learner who knows signals can be noisy but also biased. Results suggest that, even in situations with a unique inflation statistic, inflation experience may affect economic decisions and outcomes if there are doubts about the quality of public information.

Exchange Rate Pass-Through and Inflation Expectations (work in progress)

Information Frictions: The Biased-Channel (work in progress)