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Inflation Perceptions and Expectations in Sweden - Are Media Reports the `Missing Link'?

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  • Lena Dräger

    (University of Hamburg and ETH Zurich)

Abstract

Using quantitative survey data from the Swedish Consumer Tendency Survey as well as a unique data set on media reports about inflation, we analyze the formation process of inflation perceptions and expectations as well as interrelations between the variables. Throughout the analysis, the role of media reports about inflation is emphasized and results for the low inflation period January 1998 to December 2007 are compared to those including the high inflation year 2008. Rejecting rationality, we find that perceptions, but not expectations, are affected asymmetrically by news, where media effects are generally stronger in times of high and volatile inflation. For the low inflation sample period, inflation expectations are more affected by shocks to perceptions than vice versa, but Granger causality runs from expectations to perceptions. Including more volatile inflation, we find more feed-back between the variables and a strong media effect especially on perceptions.

Suggested Citation

  • Lena Dräger, 2011. "Inflation Perceptions and Expectations in Sweden - Are Media Reports the `Missing Link'?," Macroeconomics and Finance Series 201101, University of Hamburg, Department of Socioeconomics.
    • Handle: RePEc:hep:macppr:201101
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    References listed on IDEAS

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    More about this item

    Keywords

    Inflation expectations; inflation perceptions; media reports.;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications

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