The Impact of Negative News on Public Perception of Inflation

Alina Evstigneeva () and Daniel Karpov ()
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Alina Evstigneeva: Bank of Russia, Russian Federation
Daniel Karpov: Bank of Russia, Russian Federation

No wps111, Bank of Russia Working Paper Series from Bank of Russia

Abstract: This study presents a novel approach to distinguishing the news that has the greatest impact on households’ perception of inflation in Russia. Narrowing down the long list of all news items to only the strongly negative requires taking into account the concept of rational inattentiveness by the implementation of a 'too costly to ignore' principle. The feature importance models return very close results about the high importance of three main factors: news about the acceleration of inflation and single prices, about economic crisis and recession, and about the devaluation of the ruble, which is closely related to geopolitics. We also report differences in 1) higher and lower income households' perception of inflation and 2) in the formation of expected and perceived inflation. With these findings, we shed more light on the nature of households’ perception of inflation, which might be useful for central bank communications, especially during crises.

Keywords: : monetary policy; text analysis; inflation expectations (search for similar items in EconPapers)
JEL-codes: C83 D83 E52 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2023-02
New Economics Papers: this item is included in nep-ban, nep-cba, nep-cis and nep-mon
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