A new study co-authored by an MIT economist reveals, people have a haphazard approach to assessing inflation. Most citizens only pay attention to the topic intermittently, and overestimate how bad inflation will become.
Do you know your country's current inflation rate' What do you think it will be in the future? And how do you, personally, try to plan your finances accordingly?. Those are important questions for economists and policymakers, because central bankers generally assess future expectations of inflation when setting interest rates. Yet as a new study co-authored by an MIT economist reveals, people have a haphazard approach to assessing inflation. Most citizens only pay attention to the topic intermittently, and they overestimate how bad inflation will become. Still, there is some good news in these findings, based on research in the U.S. and Argentina, countries that have very different experiences with inflation. Many people are "rationally inattentive" to inflation, as economists put it. That means an occasional focus on the subject may actually help people avoid overreactions to price blips.
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