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Partisan bias in inflation expectations

Author

Listed:
  • Bachmann, Oliver
  • Gründler, Klaus
  • Potrafke, Niklas
  • Seiberlich, Ruben

Abstract

We examine partisan bias in inflation expectations. Our dataset includes inflation expectations of the New York Fed's Survey of Consumer Expectations over the period June 2013 to June 2018. The results show that inflation expectations were 0.46% points higher in Republican-dominated than in Democratic-dominated US states when Barack Obama was US president. Compared to inflation expectations in Democratic-dominated states, inflation expectations in Republican-dominated states declined by 0.73% points when Donald Trump became president. We employ the Blinder-Oaxaca decomposition method to disentangle the extent to which political ideology and other individual characteristics predict inflation expectations: around 25% of the total difference between inflation expectations in Democratic-dominated versus Republican-dominated states is based on how partisans respond to changes in the White House's occupant (partisan bias). The results also corroborate the belief that voters' misperceptions of economic conditions decline when the president belongs to the party that voters support.

Suggested Citation

  • Bachmann, Oliver & Gründler, Klaus & Potrafke, Niklas & Seiberlich, Ruben, 2019. "Partisan bias in inflation expectations," Munich Reprints in Economics 78249, University of Munich, Department of Economics.
    • Handle: RePEc:lmu:muenar:78249
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    Cited by:

    1. Demgensky, Lisa & Fritsche, Ulrich, 2023. "Narratives on the causes of inflation in Germany: First results of a pilot study," WiSo-HH Working Paper Series 77, University of Hamburg, Faculty of Business, Economics and Social Sciences, WISO Research Laboratory.
    2. Carola Conces Binder & Rupal Kamdar & Jane M. Ryngaert, 2024. "Partisan Expectations and COVID-Era Inflation," NBER Chapters, in: Inflation in the COVID Era and Beyond, National Bureau of Economic Research, Inc.
    3. Sami Diaf & Jörg Döpke & Ulrich Fritsche & Ida Rockenbach, 2020. "Sharks and minnows in a shoal of words: Measuring latent ideological positions of German economic research institutes based on text mining techniques," Macroeconomics and Finance Series 202001, University of Hamburg, Department of Socioeconomics.
    4. Hayo, Bernd & Méon, Pierre-Guillaume, 2023. "Measuring Household Inflation Perceptions and Expectations: The Effect of Guided vs Non-Guided Inflation Questions," Journal of Macroeconomics, Elsevier, vol. 78(C).
    5. Çekin, Semih Emre & Polattimur, Hamza, 2025. "Televised inflation: Measuring TV news coverage and its effect on household expectations," ZEW Discussion Papers 25-051, ZEW - Leibniz Centre for European Economic Research.
    6. Diaf, Sami & Döpke, Jörg & Fritsche, Ulrich & Rockenbach, Ida, 2022. "Sharks and minnows in a shoal of words: Measuring latent ideological positions based on text mining techniques," European Journal of Political Economy, Elsevier, vol. 75(C).
    7. David Parsley & Helen Popper, 2021. "Risk Sharing in a Politically Divided Monetary Union," Open Economies Review, Springer, vol. 32(4), pages 649-669, September.
    8. DiGiuseppe, Matthew & Garriga, Ana Carolina & Kern, Andreas, 2025. "Partisan Bias in Inflation Expectations," MPRA Paper 124391, University Library of Munich, Germany.
    9. Jonas Dovern & Klaus Wohlrabe, 2025. "The Causal Effects of Trump's Reelection on Business Expectations of German Firms," CESifo Working Paper Series 12266, CESifo.
    10. Couture, Cody & Owen, Ann L., 2025. "Political advertising and consumer sentiment: Evidence from U.S. presidential elections," European Journal of Political Economy, Elsevier, vol. 86(C).
    11. Boumans, Dorine & Gründler, Klaus & Potrafke, Niklas & Ruthardt, Fabian, 2024. "Political leaders and macroeconomic expectations: Evidence from a global survey experiment," Journal of Public Economics, Elsevier, vol. 235(C).
    12. Sangyup Choi & Sang-Hyun Kim & Myunghwan Andrew Lee & Siye Bae & Myungkyu Shim, 2022. "Partisan Bias in Inflation Beliefs: New Evidence from Korea," Working papers 2022rwp-205, Yonsei University, Yonsei Economics Research Institute.
    13. Jessica Piccolo & Yuriy Gorodnichenko, "undated". "Homeownership and Attention to Inflation: Evidence from Information Treatments," "Marco Fanno" Working Papers 0317, Dipartimento di Scienze Economiche "Marco Fanno".
    14. Coppess, Jonathan & Kalaitzandonakes, Maria & Ellison, Brenna, 2024. "Inflation Addendum: Politics and Consumer Expectations in Metro and Non-Metro Areas," farmdoc daily, University of Illinois at Urbana-Champaign, Department of Agricultural and Consumer Economics, vol. 14(172).
    15. Winnie Coleman & Dieter Nautz, 2023. "Inflation Expectations, Inflation Target Credibility, and the COVID‐19 Pandemic: Evidence from Germany," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 55(7), pages 1937-1953, October.
    16. Chua, Chew Lian & Tsiaplias, Sarantis, 2024. "The influence of supermarket prices on consumer inflation expectations," Journal of Economic Behavior & Organization, Elsevier, vol. 219(C), pages 414-433.
    17. Gunda‐Alexandra Detmers & Sui‐Jade Ho & Özer Karagedikli, 2022. "Understanding Consumer Inflation Expectations during the COVID‐19 Pandemic," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 55(1), pages 141-154, March.
    18. Farhart, Christina E. & Struby, Ethan, 2026. "Inflation expectations and political polarization: Evidence from the cooperative election study," Journal of Macroeconomics, Elsevier, vol. 87(C).

    More about this item

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • P44 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - National Income, Product, and Expenditure; Money; Inflation

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