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The Role of Media for Consumers' Inflation Expectation Formation

Author Info

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

Abstract

This paper analyzes the impact of the media on consumers' inflation expectations. We distinguish two channels through which media can influence expectations. First, the intensity of news coverage on inflation plays a role (volume channel). Second, the content of these reports matters (tone channel). Employing a unique data set capturing media reports on inflation in Germany comprising 01/1998-12/2006 we are able to discriminate between these two effects. We find that the volume effect generally improves the accuracy of consumer forecasts while the tone channel induces a media bias.

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File URL: http://dx.doi.org/10.3929/ethz-a-005640674
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Paper provided by KOF Swiss Economic Institute, ETH Zurich in its series KOF Working papers with number 08-201.

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Length: 31 pages
Date of creation: Jun 2008
Handle: RePEc:kof:wpskof:08-201
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Keywords: Monetary policy; Expectation formation; Media coverage; Media bias;

Other versions of this item:

Find related papers by JEL classification:
  • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
  • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
  • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations

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