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The News Media and the Expectation Formation of Firms

  • Buchen, Teresa
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    Forming expectations about the future path of the economy and the own business prospects is not costless for a fi rm. Instead, acquiring and processing the relevant macroeconomic information requires valuable resources. One important source of information that provides a coding service is the mass media. This paper investigates empirically whether the news media have an independent influence on the expectation formation process of fi rms that goes beyond the actual economic developments. Using the Ifo survey data that explicitly measure business expectations, and data that cover the intensity and the tone of media coverage, we come to three conclusions. First, a fi rm is more likely to update its business expectations when the volume of macroeconomic news rises. Second, the news media act as an amplifi er of actual economic developments. Third, business expectations react stronger to negative than to positive news.

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    File URL: http://econstor.eu/bitstream/10419/80005/1/VfS_2013_pid_886.pdf
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    Paper provided by Verein für Socialpolitik / German Economic Association in its series Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order with number 80005.

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    Date of creation: 2013
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    Handle: RePEc:zbw:vfsc13:80005
    Contact details of provider: Web page: http://www.socialpolitik.org/Email:


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    1. Richard T. Curtin, 2003. "Unemployment Expectations: The Impact of Private Information on Income Uncertainty," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 49(4), pages 539-554, December.
    2. N. Gregory Mankiw & Ricardo Reis, 2002. "Sticky Information Versus Sticky Prices: A Proposal To Replace The New Keynesian Phillips Curve," The Quarterly Journal of Economics, MIT Press, vol. 117(4), pages 1295-1328, November.
    3. Lucas, Robert Jr., 1972. "Expectations and the neutrality of money," Journal of Economic Theory, Elsevier, vol. 4(2), pages 103-124, April.
    4. Sims, Christopher A., 2003. "Implications of rational inattention," Journal of Monetary Economics, Elsevier, vol. 50(3), pages 665-690, April.
    5. Sascha O. Becker & Klaus Wohlrabe, 2007. "Micro Data at the Ifo Institute for Economic Research – The “Ifo Business Survey”, Usage and Access," Ifo Working Paper Series Ifo Working Paper No. 47, Ifo Institute for Economic Research at the University of Munich.
    6. Michael J. Lamla & Thomas Maag, 2012. "The Role of Media for Inflation Forecast Disagreement of Households and Professional Forecasters," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 44(7), pages 1325-1350, October.
    7. Easaw, Joshy & Ghoshray, Atanu, 2010. "News and households' subjective macroeconomic expectations," Journal of Macroeconomics, Elsevier, vol. 32(1), pages 469-475, March.
    8. Ai, Chunrong & Norton, Edward C., 2003. "Interaction terms in logit and probit models," Economics Letters, Elsevier, vol. 80(1), pages 123-129, July.
    9. Christopher D Carroll, 2002. "Macroeconomic Expectations of Households and Professional Forecasters," Economics Working Paper Archive 477, The Johns Hopkins University,Department of Economics.
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