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The role of media for consumers’ inflation expectation formation

Michael Lamla () and Sarah Lein ()

Journal of Economic Behavior & Organization, 2014, vol. 106, issue C, 62-77

Abstract: The full-information rational expectations model is clearly rejected by the data. The expectation formation process has therefore important implications for macroeconomic outcomes. We examine how consumers react to information provided by the media, by taking into account that this information is imperfect. We show that information rigidities play a role empirically. Intensive news reporting improves the accuracy of consumers’ inflation expectations, because they receive more information. However, this effect depends on the tone of the news. If news are badly toned, the effect reverts.

Keywords: Imperfect information; Inflation expectation formation; Media (search for similar items in EconPapers)
JEL-codes: D83 D84 E31 (search for similar items in EconPapers)
Date: 2014
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Working Paper: The Role of Media for Consumers' Inflation Expectation Formation (2008) Downloads
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DOI: 10.1016/j.jebo.2014.05.004

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Journal of Economic Behavior & Organization is currently edited by Houser, D. and Puzzello, D.

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