deviations.<sup>12</sup> This is also highlighted by a low _R_<sup>2</sup> of 0.021. These results indicate that survey predictions are a useful but very weak indicator of actual future spending.

There are several possible explanations for this finding. One possibility is that individuals may make consumption decisions spontaneously and are therefore not very good at predicting their spending over longer time horizons. Alternatively, individuals may have a clear idea of their future spending but may fail to follow through on their plans, for example due to a lack of self-control or financial constraints (although the latter is unlikely given that all participants of our experiment have access to credit card borrowing by definition). Another explanation could be measurement error and different types of response bias. Consumers may have a clear idea of their future spending but fail to communicate this accurately in their survey responses. This interpretation is somewhat unlikely to apply in our population, given that the participants of our experiment are highly educated, and financially experienced (87% of respondents in our sample have a college degree) and that we elicited survey expectations following standard questionnaires that were adapted and tested for this specific population.

Taken together, the evidence suggests that using survey data to measure treatment effects may be misleading, and provides a strong rationale for using administrative data to measure actual rather than planned consumption.

# **6.2 Prior Beliefs**

Figure 6 shows the distribution of inflation and exchange rate expectations at baseline. In Figure 6.a, we plot the distribution of prior beliefs about the future inflation rate. On average, prior expectations about inflation (3.39 pp) are close to the expert forecast (2.3 pp) and close to a recent rate (1.4 pp).<sup>13</sup> There is, however, significant dispersion in predictions across individuals, with individuals in the bottom decile of the distribution predicting an inflation rate of 0 pp and individuals in the top decile of the distribution predicting an inflation rate of 10 pp. In Figure 6.b, we plot the distribution of exchange rate expectations. The figure shows that beliefs about the future exchange rate follow a similar pattern as those for the future rate of inflation: prior expectations about the nominal exchange rate (4.13 MYR per USD) are centered close to the expert forecast (4.10 MYR per USD), but there is significant dispersion in individual predictions, with some individuals (bottom 10%) expecting the exchange rate to rise to 3.90 Ringgit per US Dollar and others (top 10%) expecting it to decline to 4.40 Ringgit per U.S. Dollar.

The finding that expectations are centered around the professional forecast but dispersed has been documented widely in the literature on inflation and exchange rate expectations (Armantier

> 12. The standard deviation of the variable shown in the x-axis is $602, and the standard deviation of the variable shown in the y-axis is 0.665.

> 13. The 1.4 pp annual rate of inflation corresponds to the estimate for July 2019, according to the Malaysian Department of Statistics.

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