News on inflation and the epidemiology of inflation expectations

D. Pfajfar, E. Santoro

Research output: Contribution to journalArticleScientificpeer-review

25 Citations (Scopus)

Abstract

This paper examines the nexus between news coverage on inflation and households’ inflation expectations. In doing so, we test the epidemiological foundations of the sticky information model (Carroll 2003, 2006). We use both aggregate and household-level data from the Survey Research Center at the University of Michigan. We highlight a fundamental disconnection among news on inflation, consumers’ frequency of expectation updating, and the accuracy of their expectations. Our evidence provides at best weak support to the epidemiological framework, as most of the consumers who update their expectations do not revise them toward professional forecasters’ mean forecast.
Original languageEnglish
Pages (from-to)1045-1067
JournalJournal of Money, Credit and Banking
Volume45
Issue number6
Publication statusPublished - 2013

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