Are Consumer Expectations Forward-Looking: A Case for Pakistan
doi: https://doi.org/10.35536/lje.2023.v28.i2.a1
Assistant Director, Research Department, State Bank of Pakistan
Abstract
We have used the Dynamic Time Warping (DTW) algorithm to calculate the forward-looking consumer inflation expectation forward-lookingness. We have used DTW instead of widely used parametric techniques as this algorithm does not require specific assumptions relating to time series data. The results suggest that expectations are more backward-looking from 2012 to 2022. Furthermore, we examined consumers' response to the exchange rate regime shift and found evidence of consumers becoming more forwardlooking due to the deliberate change in policy stance from fixed to managed float. This suggests that changes in economic policy can directly impact the consumer's expectations formation process.
Keywords
Consumers, inflation, inflation expectations.
Citation:
“Inayat, A. (2024). Are Consumer Expectations Forward-Looking: A Case for Pakistan.” Lahore Journal of Economics, 28(2), 1-13.
https://doi.org/10.35536/lje.2023.v28.i2.a1
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