Going viral: Inflation narratives and the macroeconomy

Max Weinig and Ulrich Fritsche

No 86, WiSo-HH Working Paper Series from University of Hamburg, Faculty of Business, Economics and Social Sciences, WISO Research Laboratory

Abstract: This paper investigates the role of media narratives in shaping household inflation expectations. We construct dynamic indicators of inflation narratives using a semi-supervised topic model in combination with Latent Semantic Scaling, applied to a large corpus of U.S. news coverage from 2018 to 2023. Using Granger causality tests and local projections, we show that narratives concerning government spending, supply chain disruptions, the war in Ukraine, and corporate profits are systematically related to changes in both short- and medium-term inflation expectations. Further, our analysis reveals substantial heterogeneity across socioeconomic characteristics, contributing to a growing literature on the determinants of heterogeneous expectations.

Keywords: narratives; expectations; inflation; media; textual data; machine learning (search for similar items in EconPapers)
JEL-codes: D84 E31 E32 E52 E71 (search for similar items in EconPapers)
Date: 2025, Revised 2025
New Economics Papers: this item is included in nep-big, nep-his and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:uhhwps:307613

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