The Expectations of Others

Ezequiel Garcia-Lembergman (), Ina Hajdini, John Leer, Mathieu Pedemonte and Raphael Schoenle
Authors registered in the RePEc Author Service: Ezequiel Garcia-Lembergman

No 23-22, Working Papers from Federal Reserve Bank of Cleveland

Abstract: Based on a framework of memory and recall that accounts for social networks, we provide conditions under which social networks can amplify expectations. We provide evidence for several predictions of the model using a novel dataset on inflation expectations and social network connections: Inflation expectations in the social network are statistically significantly, positively associated with individual inflation expectations; the relationship is stronger for groups that share common demographic characteristics, such as gender, income, or political affiliation. An instrumental variable approach further establishes causality of these results while also showing that salient information transmits strongly through the network. Our estimates imply that the influence of the social network overall amplifies but does not destabilize inflation expectations.

Keywords: memory and recall; inflation expectations; social network (search for similar items in EconPapers)
JEL-codes: C83 E31 E71 (search for similar items in EconPapers)
Pages: 69
Date: 2023-09-26
New Economics Papers: this item is included in nep-ger and nep-net
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Citations: View citations in EconPapers (1)

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Working Paper: The Expectations of Others (2023)
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DOI: 10.26509/frbc-wp-202322

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