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The reaction of inflation forecasts to news about the Fed

Sandeep Mazumder ()

Economic Modelling, 2021, vol. 94, issue C, 256-264

Abstract: It is critical for the Federal Reserve to stabilize inflation expectations in order to achieve their desired inflation target. Yet, the empirical evidence documents that consumers and professional forecasters often have different views about the expected future inflation rate. Previous research demonstrates that greater newspaper coverage on inflation closes the gap between consumers' and professionals’ inflation forecasts. However, the literature only examines newspaper references to inflation, while more general references to the Fed have been overlooked. This paper fills this void, where we find some evidence that newspaper references to the Fed close the gap between consumer and professional inflation forecasts, although this effect varies by newspaper and by the way in which news coverage is measured.

Keywords: Federal Reserve; Inflation expectations; Newspapers; Media (search for similar items in EconPapers)
JEL-codes: E31 E58 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1016/j.econmod.2020.09.026

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