Non-response Bias in Household Inflation Expectations Surveys

Abstract

This paper uses micro-data from the Reserve Bank of New Zealand's Household Inflation Expectations survey to obtain a more accurate read of households' true inflation expectations by understanding how different demographic groups respond (or do not respond) to specific questions in the survey. Using a Heckman selection model, we assess whether there is item non-response bias in the survey by comparing the demographic characteristics of responders and non-responders. We quantify and demonstrate how to adjust for bias in aggregate (mean) measures of inflation expectations caused by item non-response. We show that there is a positive bias, and the aggregate inflation expectation series shifts down after the adjustment.