Anticipated versus "surprise" inflation in household consumption behaviour

Abstract

The purpose of this paper is to look at the question of whether it is the anticipated or "Surprise" inflation (or both) that matter for household consumption and saving behaviour. We use a large data sample from 23 countries covering the period 1960-1979 with some minor exceptions. Evidence is overwhelmingly against the hypothesis that only the "Surprise" part of inflation matters for household consumption and saving behaviour, but is a bit conflicting on the question of whether the anticipated and "Surprise" parts of inflation affect with equal force so that observed inflation could be used as the appropriate inflation variable in household consumption and saving functions.