Partisan Expectations and COVID-Era Inflation

Carola Binder, Rupal Kamdar and Jane Ryngaert

No 32650, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We document that, during the COVID-19 era, the inflation expectations of Democrats remained strongly anchored, while those of Republicans did not. Republicans' expectations not only rose well above the inflation target, but also became more sensitive to a variety of shocks, including CPI releases and energy prices. We then exploit geographic variation in political affiliation at the MSA level to show that the partial de-anchoring of expectations had implications for realized inflation. Counterfactual exercises imply that, had all expectations become as unanchored as those of Republicans, average inflation would have been two to three percentage points higher for much of the pandemic period, ceteris paribus.

JEL-codes: D72 E03 E31 (search for similar items in EconPapers)
Date: 2024-07
New Economics Papers: this item is included in nep-mon and nep-pol
Note: ME
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Citations: View citations in EconPapers (2)

Published as Carola Conces Binder & Rupal Kamdar & Jane M. Ryngaert, 2024. "Partisan expectations and COVID-era inflation," Journal of Monetary Economics, .
Published as Partisan Expectations and COVID-Era Inflation , Carola Conces Binder, Rupal Kamdar, Jane M. Ryngaert. in Inflation in the COVID Era and Beyond , Ball and Gorodnichenko. 2024

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Chapter: Partisan Expectations and COVID-Era Inflation (2024)
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