Inflation narratives and expectations

Giovanni Trebbi

No 3158, Working Paper Series from European Central Bank

Abstract: I study how demand-supply narrative disagreement between general and specialized newspapers can explain households’ absolute gap in inflation expectations with experts. I measure inflation narratives via a Causality Extraction algorithm that can identify causal relationships between events in a text and, hence, extract the perceived triggers of inflation. Causal relations can explain why narratives affect people’s beliefs and cannot be captured by dictionary methods, topic models, and word embeddings. I then classify inflation narratives into demand and supply narratives based on their focus on demand and supply triggers. I measure narrative disagreement between general and specialized newspapers from their attention difference on demand and supply narratives. The absolute expectation gap widens when narrative disagreement increases, especially for non-college-educated and older households. Unlike the narratives of specialized newspapers, the narratives of general newspapers incorrectly align with experts’ demand-supply views. JEL Classification: C53, D1, D8, E3

Keywords: causality extraction; natural language processing; news media (search for similar items in EconPapers)
Date: 2025-12
New Economics Papers: this item is included in nep-mon
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.ecb.europa.eu//pub/pdf/scpwps/ecb.wp3158~d00f854954.en.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20253158

Access Statistics for this paper

More papers in Working Paper Series from European Central Bank 60640 Frankfurt am Main, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Official Publications ().