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Role of the Media in the Inflation Expectation Formation Process

Author

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  • Tetiana Yukhymenko

    (National Bank of Ukraine)

Abstract

This research highlights the role played by the media in the inflation expectations formation process of different types of respondents in Ukraine. Using a large news corpus and machine learning techniques I constructed news-based measures transforming text into quantitative indicators, which reflect news topics relevant to inflation expectations. As such, I found evidence that the different news topics have an impact on inflation expectations and can explain part of their variance. Thus, my results can help understand inflation expectations, especially as anchoring inflation expectations remains a key challenge for central banks.

Suggested Citation

  • Tetiana Yukhymenko, 2021. "Role of the Media in the Inflation Expectation Formation Process," IHEID Working Papers 13-2021, Economics Section, The Graduate Institute of International Studies.
    • Handle: RePEc:gii:giihei:heidwp13-2021
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    References listed on IDEAS

    as
    1. Michael D. Bauer, 2015. "Inflation Expectations and the News," International Journal of Central Banking, International Journal of Central Banking, vol. 11(2), pages 1-40, March.
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    5. Olivier Coibion & Yuriy Gorodnichenko, 2015. "Information Rigidity and the Expectations Formation Process: A Simple Framework and New Facts," American Economic Review, American Economic Association, vol. 105(8), pages 2644-2678, August.
    6. Angelico, Cristina & Marcucci, Juri & Miccoli, Marcello & Quarta, Filippo, 2022. "Can we measure inflation expectations using Twitter?," Journal of Econometrics, Elsevier, vol. 228(2), pages 259-277.
    7. Michael Woodford, 2004. "Inflation targeting and optimal monetary policy," Review, Federal Reserve Bank of St. Louis, vol. 86(Jul), pages 15-42.
    8. Oleksandr Zholud & Volodymyr Lepushynskyi & Sergiy Nikolaychuk, 2019. "The Effectiveness of the Monetary Transmission Mechanism in Ukraine since the Transition to Inflation Targeting," Visnyk of the National Bank of Ukraine, National Bank of Ukraine, issue 247, pages 19-37.
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    11. Mazumder, Sandeep, 2021. "The reaction of inflation forecasts to news about the Fed," Economic Modelling, Elsevier, vol. 94(C), pages 256-264.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Inflation expectations; natural language processing; textual data; machine learning;
    All these keywords.

    JEL classification:

    • C55 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Large Data Sets: Modeling and Analysis
    • C82 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Macroeconomic Data; Data Access
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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