The Role of Media for Inflation Forecast Disagreement of Households and Professionals

Thomas Maag () and Michael Lamla ()

No 09-223, KOF Working papers from KOF Swiss Economic Institute, ETH Zurich

Abstract: This paper investigates the effects of media coverage and macroeconomic con- ditions on inflation forecast disagreement of German households and professional forecasters. We adopt a Bayesian learning model in which media coverage of infla- tion affects forecast disagreement by influencing information sets as well as predictor choice. Our empirical results show that disagreement of households depends on the content of news stories (tone) but is unaffected by reporting intensity (volume) and by the heterogeneity of story content (information entropy). Disagreement of pro- fessionals does not depend on media coverage. With respect to the influence of macroeconomic variables we provide evidence that disagreement of households and professionals primarily depends on the current rate of inflation.

Keywords: forecast disagreement; inflation expectations; media coverage; Bayesian learning (search for similar items in EconPapers)
JEL-codes: E31 E37 D83 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-cul, nep-for, nep-mac and nep-mon
Date: 2009-04
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Persistent link: http://EconPapers.repec.org/RePEc:kof:wpskof:09-223

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