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The role of media for consumers’ inflation expectation formation

Listed author(s):
  • Lamla, Michael J.
  • Lein, Sarah M.

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.

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File URL: http://www.sciencedirect.com/science/article/pii/S0167268114001450
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Article provided by Elsevier in its journal Journal of Economic Behavior & Organization.

Volume (Year): 106 (2014)
Issue (Month): C ()
Pages: 62-77

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Handle: RePEc:eee:jeborg:v:106:y:2014:i:c:p:62-77
DOI: 10.1016/j.jebo.2014.05.004
Contact details of provider: Web page: http://www.elsevier.com/locate/jebo

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  11. 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.
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  24. repec:pri:cepsud:99blinderkrueger is not listed on IDEAS
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