Determinants of disagreement: learning from Indian inflation expectations survey of households

Abstract

This study explores the determinants of disagreement in households' belief on future inflation. Households commonly show strong information rigidity as a consequence of stickiness in their information update (Mankiw and Reis, 2002, 2006). This paper contributes to the understanding of the formation of disagreement of the Indian households by investigating the effects of - day to day purchasing experiences of the agents, the intensity of news about inflation in the media, and central bank transparency. We find the positive effects of their recent price experiences, media influence, and inflation targeting on lowering the disagreement. Female and Young people tend to exhibit stronger effects in comparison to their counterparts.