News on Inflation and the Epidemiology of Inflation Expectations

TY - JOUR

T1 - News on Inflation and the Epidemiology of Inflation Expectations

AU - Pfajfar , Damjan

AU - Santoro, Emiliano

N1 - JEL Classification: C53;D84;E31

PY - 2013/9

Y1 - 2013/9

N2 - This paper examines the nexus between news coverage on inflation and households’ inflation expectations. In doing so, we test the epidemiological foundations of the sticky information model (Carroll ). We use both aggregate and household-level data from the Survey Research Center at the University of Michigan. We highlight a fundamental disconnection among news on inflation, consumers’ frequency of expectation updating, and the accuracy of their expectations. Our evidence provides at best weak support to the epidemiological framework, as most of the consumers who update their expectations do not revise them toward professional forecasters’ mean forecast.

AB - This paper examines the nexus between news coverage on inflation and households’ inflation expectations. In doing so, we test the epidemiological foundations of the sticky information model (Carroll ). We use both aggregate and household-level data from the Survey Research Center at the University of Michigan. We highlight a fundamental disconnection among news on inflation, consumers’ frequency of expectation updating, and the accuracy of their expectations. Our evidence provides at best weak support to the epidemiological framework, as most of the consumers who update their expectations do not revise them toward professional forecasters’ mean forecast.

KW - Faculty of Social Sciences

KW - inflation

KW - survey expectations

KW - news on inflation

KW - information stickiness

U2 - 10.1111/jmcb.12043

DO - 10.1111/jmcb.12043

M3 - Journal article

SN - 0022-2879

VL - 45

SP - 1045

EP - 1067

JO - Journal of Money, Credit and Banking

JF - Journal of Money, Credit and Banking

IS - 6

ER -