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News on Inflation and the Epidemiology of Inflation Expectations

Author

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  • Pfajfar, D.

    (Tilburg University, Center For Economic Research)

  • Santoro, E.

Abstract

This paper examines the nexus between news coverage on inflation and households’ inflation expectations. In doing so, we test the epidemiological foundations of the sticky information model (Carroll ). We use both aggregate and household‐level data from the Survey Research Center at the University of Michigan. We highlight a fundamental disconnection among news on inflation, consumers’ frequency of expectation updating, and the accuracy of their expectations. Our evidence provides at best weak support to the epidemiological framework, as most of the consumers who update their expectations do not revise them toward professional forecasters’ mean forecast.
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Suggested Citation

  • Pfajfar, D. & Santoro, E., 2012. "News on Inflation and the Epidemiology of Inflation Expectations," Discussion Paper 2012-048, Tilburg University, Center for Economic Research.
    • Handle: RePEc:tiu:tiucen:515ee09e-b946-439f-afff-d348a491b752
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    References listed on IDEAS

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    1. Lena Dräger, 2015. "Inflation perceptions and expectations in Sweden – Are media reports the missing link?," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 77(5), pages 681-700, October.
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    More about this item

    Keywords

    Inflation; Survey Expectations; News; Information Stickiness;
    All these keywords.

    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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