Document Type
Honors Project - Open Access
Abstract
Inflation expectations are important determinants of future inflation and individual consumer behavior. Recent attention has been devoted to individual-level heterogeneity in inflation expectations. I consider political partisanship as a source of heterogeneity and question whether expectations are biased by partisanship. I find that they are, i.e., that individuals from the president's political party expect lower inflation relative to members of the opposing party (this difference is statistically insignificant during the Bush presidency), and that this result cannot be explained by additional sources of heterogeneity. I also examine whether belonging to the president's political party affects the rationality of expectations and find, first, that individuals from the president's political party base their expectations more closely on CPI relative to the opposing party (although this difference is too small to be statistically distinguishable during the Bush and Biden administrations), and second, that members of the president's party have more accurate expectations.
Recommended Citation
Durall, Anna, "Partisan Perspectives on Inflation: Exploring Bias in Economic Expectations" (2024). Economics Honors Projects. 122.
https://digitalcommons.macalester.edu/economics_honors_projects/122
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Comments
Acknowledgements: I am deeply grateful for the guidance and support received from my professors, mentors, and peers. Special thanks to my thesis advisor, Mario Solis-Garcia, Associate Professor of Economics at Macalester College, and to committee members Amy Damon, Professor of Economics and Latin American Studies at Macalester College, and Gary Krueger, Cargill Professor of International Economics at Macalester College, whose guidance was invaluable. I also appreciate the assistance provided by Benny Goldman, PhD candidate at Harvard University, and feedback from Gabriel Aurelio Pino Saldias, Assistant Professor at Universidad Diego Portales. Lastly, I am thankful for the camaraderie and insights of my Honors peer group: Ghaicha Aboubacar Ahe, Mahmoud Majdi, Bobbie Pennington, Mateo Useche Rosania, and Zak Yudhishthu.