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Inflation perceptions and expectations in Sweden - are media reports the 'missing link'?

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  • Lena Draeger

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 per- ceptions. Including more volatile inflation, we find more feed-back between the variables and a strong media effect especially on perceptions.

Suggested Citation

  • Lena Draeger, 2011. "Inflation perceptions and expectations in Sweden - are media reports the 'missing link'?," KOF Working papers 11-273, KOF Swiss Economic Institute, ETH Zurich.
  • Handle: RePEc:kof:wpskof:11-273
    DOI: 10.3929/ethz-a-006341668
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    References listed on IDEAS

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    1. Sarah M. Lein & Thomas Maag, 2011. "The Formation Of Inflation Perceptions: Some Empirical Facts For European Countries," Scottish Journal of Political Economy, Scottish Economic Society, vol. 58(2), pages 155-188, May.
    2. Paolo del Giovane & Silvia Fabiani & Roberto Sabbatini, 2009. "What's Behind "Inflation Perceptions"? A Survey-Based Analysis of Italian Consumers," Giornale degli Economisti, GDE (Giornale degli Economisti e Annali di Economia), Bocconi University, vol. 68(1), pages 25-52, April.
    3. Christopher D. Carroll, 2003. "Macroeconomic Expectations of Households and Professional Forecasters," The Quarterly Journal of Economics, Oxford University Press, vol. 118(1), pages 269-298.
    4. Lena Vogel & Jan-Oliver Menz & Ulrich Fritsche, 2009. "Prospect Theory and Inflation Perceptions - An Empirical Assessment," Macroeconomics and Finance Series 200903, University of Hamburg, Department of Socioeconomics.
    5. Wändi Bruine de Bruin & Michael F. Bryan & Simon M. Potter & Giorgio Topa & Wilbert Van der Klaauw, 2008. "Rethinking the measurement of household inflation expectations: preliminary findings," Staff Reports 359, Federal Reserve Bank of New York.
    6. Eife, Thomas, 2006. "Currency Changeovers as Natural Experiments," Munich Dissertations in Economics 5839, University of Munich, Department of Economics.
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    Cited by:

    1. Michael J. Lamla & Sarah M. Lein & Jan-Egbert Sturm, 2020. "Media reporting and business cycles: empirical evidence based on news data," Empirical Economics, Springer, vol. 59(3), pages 1085-1105, September.
    2. Pfajfar, Damjan, 2013. "Formation of rationally heterogeneous expectations," Journal of Economic Dynamics and Control, Elsevier, vol. 37(8), pages 1434-1452.
    3. Ivana Lolic & Petar Soric & Mirjana Cizmesija, 2017. "Disentangling the Relationship between News Media and Consumers' Inflation Sentiment: the Case of Croatia," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 67(3), pages 221-249, June.
    4. Markus Knell & Helmut Stix, 2019. "How Peer Groups Influence Economic Perceptions," Working Papers 227, Oesterreichische Nationalbank (Austrian Central Bank).

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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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