Inflation perceptions and expectations in Sweden – Are media reports the missing link?

Lena Dräger

Oxford Bulletin of Economics and Statistics, 2015, vol. 77, issue 5, 681-700

Abstract: type="main" xml:id="obes12078-abs-0001">

We analyze the interrelation between consumers' quantitative inflation perceptions and expectations as well as actual inflation rates in Sweden. The role of media reports about inflation is emphasized. Structural vector error correction models show stable cointegration between actual, perceived and expected inflation. Impulse responses and forecast error variance decompositions suggest strong interaction between perceived and expected inflation, with a lesser role for actual inflation. Media effects are generally small, but imply an asymmetric reaction of inflation expectations and perceptions to news on increasing vs. decreasing inflation. Thus, to anchor inflation expectations, central banks should explore better communication channels to inform consumers about actual inflation.

Date: 2015
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Related works:
Working Paper: Inflation Perceptions and Expectations in Sweden - Are Media Reports the `Missing Link'? (2011)
Working Paper: Inflation perceptions and expectations in Sweden - are media reports the 'missing link'? (2011)
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