Do consumers actually monitor the inflation rate? Evidence from New Zealand*

Figures & data

Table 1. Do you monitor the rate of inflation? (absolute and relative number of respondents).

Yes	No	Don’t know
352 (35%)	605 (61%)	43 (4%)

Table 2. Explaining ‘Monitoring the inflation rate’.

	Coefficient	SE	Average marginal effects (AME)	AME by standard deviation
Feels informed about inflation	0.84***	0.11	0.13	0.15
Feels informed about RBNZ	0.41***	0.14	0.06	0.06
Desire to be informed about RBNZ	0.31***	0.11	0.05	0.05
Does not keep up with RBNZ	−1.18**	0.50	−0.18	n.a.
Macroeconomic knowledge	0.32***	0.07	0.05	0.09
Egalitarian attitude	−0.17**	0.08	−0.03	−0.04
Risk propensity	0.40***	0.15	0.06	0.04
Constant	−5.95***	0.60
Pseudo-R^2 = 0.32; Chi^2(7) = 219***; log pseudolikelihood = −366; testing-down restriction:
F(52, 4.5E+07) = 1.14; number of observations: 808.

Notes: Estimated using a logit model. White (1980) robust SEs are used. For dummy variable reference values, see list of variables in the Appendix. *, **, and *** indicate nominal significance at a 10%, 5%, and 1% level, respectively.

Table

Variable	Coding and Comments	Mean	Std. dev.	Min	Max
Monitoring the inflation rate	Dummy. Coded 1 if respondents monitor the inflation rate.	0.35	0.48	0	1

Table

Variable	Coding and Comments	Mean	Std. dev.	Min	Max
(i) ‘Economic Situation’
Income	Per capita household income in NZD1,000. We added 184 observations through 10 rounds of imputations using: Age, Age squared, education dummies, Saver, Future-oriented time preference, Self-employed full time, Employed full time, Employed part time, Retired, Student, Unemployed, Beneficiary. Descriptive statistics for imputation 10.	34.0	27.1	2.7	240
Net personal wealth	In NZD1,000. We added 224 observations through 10 rounds of imputations using: Age, Age squared, education dummies, Saver, Future-oriented time preference, Self-employed full time, Employed full time, Employed part time, Retired, Student, Unemployed, Beneficiary. Descriptive statistics for imputation 10.	35.2	88.0	−375	500
Saver	Dummy	0.63	0.48	0	1
Debtor	Dummy	0.30	0.46	0	1
Satisfaction with financial situation	Very dissatisfied (coded 1)	3.31	1.12	1	5
	Dissatisfied (coded 2)
	Neither satisfied nor dissatisfied (coded 3)
	Satisfied (coded 4)
	Very satisfied (coded 5)
	Don’t know (coded 3)
Employed full time	Dummy	0.38	0.49	0	1
Employed part time	Dummy	0.11	0.32	0	1
Homemaker	Dummy	0.06	0.24	0	1
Student	Dummy	0.08	0.27	0	1
Retired	Dummy	0.12	0.33	0	1
Unemployed	Dummy	0.05	0.21	0	1
Beneficiary	Dummy	0.04	0.20	0	1
(ii) ‘Economic Knowledge’
Macroeconomic knowledge	The sum of correct answers to questions on the bond rate, the goal set in the Fiscal Strategy Report, debt-to-GDP ratio, Official Cash Rate, main objective of RBNZ, independence of RBNZ with regard to interest rate setting, interest rate reaction to an expected increase in the inflation rate, inflation target as agreed in PTA.	2	1.75	0	8
Feels informed about RBNZ	Very poor (coded 1), Poor (coded 2), Neither poor nor good (coded 3), Good (coded 4), Very good (coded 5)	2.72	0.96	1	5
Feels informed about inflation	Very poor (coded 1), Poor (coded 2), Neither poor nor good (coded 3), Good (coded 4), Very good (coded 5)	3.42	1.17	1	5
Feels informed about OCR	Very poor (coded 1), Poor (coded 2), Neither poor nor good (coded 3), Good (coded 4), Very good (coded 5)	3.10	1.34	1	5
Heard of PTA	Dummy. Coded 1 if respondent has heard of the Policy Targets Agreement.	0.15	0.36	0	1
(iii) ‘Information Search’
Desire to be informed about RBNZ	Not at all important (coded 1), Unimportant (coded 2), Neither important nor unimportant (coded 3), Important (coded 4), Very important (coded 5), Don’t know (coded 3)	3.18	1.06	1	5
Information through newspaper	Dummy	0.11	0.31	0	1
Information through radio	Dummy	0.08	0.27	0	1
Information through TV	Dummy	0.18	0.39	0	1
Information through Internet	Dummy	0.22	0.42	0	1
Information through friends	Dummy	0.12	0.32	0	1
Information through colleagues	Dummy	0.07	0.26	0	1
Information through own bank	Dummy	0.06	0.24	0	1
Information through financial sector	Dummy	0.06	0.24	0	1
Does not keep up with RBNZ	Dummy	0.12	0.32	0	1
(iv) ‘Attitudes and Values’
Trust in RBNZ	5-point Likert scale ranging from (1) ‘No trust and confidence at all’ to (5) ‘Complete trust and confidence’; Don’t know (coded 3).	3.30	0.96	1	5
Institutional trust	Principal component based on trust in government, trust in parliament, trust in United Nations, and trust in International Monetary Fund.	−3e−09	1.55	−3.50	4.38
General trust	Dummy	0.34	0.47	0	1
Politicians act in public’s best interest	5-point Likert scale ranging from (1) ‘Most politicians in New Zealand serve the interests of particular groups’ to (5) ‘Most politicians in New Zealand act with the general public’s best interests in mind’.	3.02	0.93	1	5
Politicians long-term oriented	5-point Likert scale ranging from (1) ‘Most politicians are only concerned about the next election’ to (5) ‘Most politicians are concerned about New Zealand’s long-term well-being’.	2.38	1.15	1	5
Politicians fiscally competent	5-point Likert scale ranging from (1) ‘The Government wastes the revenue it collects in taxes’ to (5) ‘The Government conscientiously manages the revenue it collects in taxes’.	2.73	1.11	1	5
Confidence in politicians	5-point Likert scale ranging from (1) ‘I do not have confidence in New Zealand politicians’ to (5) ‘Overall, I have confidence in New Zealand politicians’.	2.59	1.12	1	5
Egalitarian attitude	5-point Likert scale ranging from (1) ‘To encourage individual effort, the difference between people’s incomes should be greater’ to (5) ‘People’s incomes should be more equal’.	3.32	1.20	1	5
National Party	Dummy	0.29	0.45	0	1
Labour Party	Dummy	0.23	0.42	0	1
Green Party	Dummy	0.14	0.34	0	1
New Zealand First	Dummy	0.08	0.28	0	1
(v) ‘Socio-Demographic and Psychological indicators’
Female	Dummy	0.52	0.50	0	1
Age	5-year intervals starting from 18 years	6.58	3.33	1	13
Children	Dummy	0.31	0.46	0	1
Married	Dummy	0.62	0.48	0	1
Secondary school qualification	Dummy	0.26	0.44	0	1
Polytechnic qualification or trade certificate	Dummy	0.20	0.40	0	1
Bachelor’s degree or higher	Dummy	0.41	0.49	0	1
Self-employed full time	Dummy	0.06	0.24	0	1
Self-employed part time	Dummy	0.05	0.22	0	1
Town	Dummy	0.28	0.45	0	1
Rural	Dummy	0.20	0.40	0	1
North Island	Dummy	0.43	0.50	0	1
Auckland	Dummy	0.32	0.47	0	1
NZ European	Dummy	0.68	0.47	0	1
Maori	Dummy	0.04	0.19	0	1
Asian	Dummy	0.10	0.30	0	1
Risk propensity	Continuous variable that varies between −1 (maximum risk aversion) and +1 (maximum risk propensity). We assessed the interviewees’ risk preferences by confronting the interviewees with the choice of either receiving a safe payoff or taking part in a lottery.	0.03	0.65	−1	1
Future-oriented time preference	Continuous variable running from 0 (completely impatient) to 1 (completely patient). Two experiments are conducted to assess the respondents’ time preferences in order to account for the fact that many people are more patient in the long run than in the short run.	0.61	0.28	0.29	1
Short-run impatience	Continuous variable running from 0 (completely impatient) to 1 (completely patient). Two experiments are conducted to assess the respondents’ time preferences in order to account for the fact that many people are more patient in the long run than in the short run.	0.56	0.27	0.29	1
Time spent on survey	Time respondent needed to fill out the questionnaire (in hours)	1.62	11.3	0.06	194

White, H. (1980). A heteroskedasticity-consistent covariance matrix estimator and a direct test for heteroskedasticity. Econometrica, 48, 817–838. https://www.jstor.org/stable/1912934

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