The Causal Effect of News on Inflation Expectations

Carola Binder, Pascal Frank and Jane Ryngaert

No 34088, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper studies the response of household inflation expectations to television news coverage of inflation. We analyze news data from CNN, Fox News, and MSNBC alongside a daily measure of inflation expectations. Using a local projection instrumental variables approach, we estimate the dynamic causal effect of inflation news coverage on household inflation expectations at a daily frequency. Increased media coverage of inflation raises expectations, with effects peaking within a few days and fading after approximately 10 days. Additionally, we document a key nonlinearity: release days with positive CPI surprises—i.e., inflation exceeding market expectations—lead to stronger expectation responses than release days with negative surprises.

JEL-codes: D04 D83 D84 E31 (search for similar items in EconPapers)
Date: 2025-08
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