Perception, expectation, and economic literacy: households and firms in high inflation

Official URL: https://dx.doi.org/10.1007/978-3-032-29188-2_19

This chapter offers a descriptive analysis of how firms and households in a high-inflation economy perceive and process macroeconomic information. It focuses on three key dimensions: knowledge of past inflation, sources of economic information and uncertainty, and forward-looking expectations. We begin by examining how accurately firms and households recall recent inflation figures, such as monthly and annual price changes. This allows us to assess the extent to which agents are informed about past inflation outcomes, and how this varies across characteristics such as education, income, region, and firm size. Next, we document where economic agents obtain financial and macroeconomic information. We also explore the relationship between information sources and self-reported attitudes toward economic risk and examine how uncertainty about future expectations relates to these factors. The third focus of the chapter is on expectations. We discuss the subjective forecasts of households and firms for key macroeconomic variables, including inflation and interest rates, and assess how different segments of the sample form beliefs about the future economic environment based on observable characteristics. By documenting what firms and households know about the recent past and what they expect in the near future, this chapter provides a factual baseline for future research on expectation formation and policy communication in inflationary environments. The goal is to offer a clear empirical overview of how economic agents perceive the macroeconomic landscape in a high-inflation setting.