Inflation expectations in Singapore: A behavioural approach

• Main Authors: CLARK, Alexander, GHOSH, Aurobindo, HANES, Samuel
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2018
• Subjects: Inflation; Singapore; Asian Studies; Behavioral Economics; Finance; Finance and Financial Management
• Online Access: https://ink.library.smu.edu.sg/lkcsb_research/5879; https://ink.library.smu.edu.sg/context/lkcsb_research/article/6878/viewcontent/17_Special_Feature_C.pdf
• Institution: Singapore Management University

The expectations of economic agents have significant impact on their decisions and are key determinants of macroeconomic outcomes such as inflation, economic growth and unemployment. For example, if a worker believes that consumer prices will rise sharply next year, she would demand a wage increase. Similarly, a homeowner with a fixed interest mortgage might make an early repayment if she expects price levels to fall, knowing that the real value of her mortgage debt will increase. In these cases, expectations about inflation could lead to changes in behaviour and in the aggregate, influence prices and become self-fulfilling.