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Inflation Expectations and Consumer Spending at the Zero Bound

: Micro Evidence

July 12, 2013
Hibiki Ichiue*1
Shusaku Nishiguchi*2

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Standard theoretical models predict that higher inflation expectations generate greater current consumer spending at the zero lower bound of interest rates. However, a recent empirical study using US micro data finds negative results for this relationship. We use micro data for Japan, which has experienced low interest rates for a prolonged period, to estimate ordered probit models with a variety of controls. We find evidence supporting the prediction of standard models: survey respondents with higher expected inflation tend to indicate that their household has increased real spending compared with one year ago but will decrease it in the future. This relationship appears to be stronger for asset holders and older people.

JEL Classifications
E20, E21, E30, E31, E50, E52

Inflation expectations; Survey data; Monetary policy; Zero lower bound; Japan

  1. *1Monetary Affairs Department
    E-mail :
  2. *2Monetary Affairs Department
    E-mail :


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