The News Media and the Expectation Formation of Firms

Teresa Buchen

VfS Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order from Verein für Socialpolitik / German Economic Association

Abstract: Forming expectations about the future path of the economy and the own business prospects is not costless for a fi rm. Instead, acquiring and processing the relevant macroeconomic information requires valuable resources. One important source of information that provides a coding service is the mass media. This paper investigates empirically whether the news media have an independent influence on the expectation formation process of fi rms that goes beyond the actual economic developments. Using the Ifo survey data that explicitly measure business expectations, and data that cover the intensity and the tone of media coverage, we come to three conclusions. First, a fi rm is more likely to update its business expectations when the volume of macroeconomic news rises. Second, the news media act as an amplifi er of actual economic developments. Third, business expectations react stronger to negative than to positive news.

JEL-codes: D84 D89 E32 (search for similar items in EconPapers)
Date: 2013
New Economics Papers: this item is included in nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc13:80005

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