Partisan expectations and COVID-era inflation

Carola Binder, Rupal Kamdar and Jane Ryngaert

Journal of Monetary Economics, 2024, vol. 148, issue S

Abstract: We document that, during the COVID-19 era, the inflation expectations of Democrats remained strongly anchored, while those of Republicans did not. Republicans’ expectations not only rose well above the inflation target, but also became more sensitive to a variety of shocks, including CPI releases and energy prices. We then exploit geographic variation in political affiliation at the MSA level to show that the partial de-anchoring of expectations had implications for realized inflation. Counterfactual exercises imply that, had all expectations become as unanchored as those of Republicans, average inflation would have been two to four percentage points higher for much of the pandemic period, ceteris paribus.

Keywords: Inflation expectations; Anchoring; Macroeconomic data releases; Regional Phillips curve (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (2)

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Related works:
Chapter: Partisan Expectations and COVID-Era Inflation (2024)
Working Paper: Partisan Expectations and COVID-Era Inflation (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:148:y:2024:i:s:s0304393224001028

DOI: 10.1016/j.jmoneco.2024.103649

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