TY - JOUR

T1 - The role of media for consumers' inflation expectation formation

AU - Lamla, Michael J.

AU - Lein-Rupprecht, Sarah M

PY - 2014/10

Y1 - 2014/10

N2 - The full-information rational expectations model is clearly rejected by the data. The expectation formation process has therefore important implications for macroeconomic outcomes. We examine how consumers react to information provided by the media, by taking into account that this information is imperfect. We show that information rigidities play a role empirically. Intensive news reporting improves the accuracy of consumers’ inflation expectations, because they receive more information. However, this effect depends on the tone of the news. If news are badly toned, the effect reverts.

AB - The full-information rational expectations model is clearly rejected by the data. The expectation formation process has therefore important implications for macroeconomic outcomes. We examine how consumers react to information provided by the media, by taking into account that this information is imperfect. We show that information rigidities play a role empirically. Intensive news reporting improves the accuracy of consumers’ inflation expectations, because they receive more information. However, this effect depends on the tone of the news. If news are badly toned, the effect reverts.

KW - Economics

KW - Imperfect information

KW - Inflation expectations formation

KW - Media

U2 - 10.1016/j.jebo.2014.05.004

DO - 10.1016/j.jebo.2014.05.004

M3 - Journal articles

VL - 106

SP - 62

EP - 77

JO - Journal of Economic Behavior and Organization

JF - Journal of Economic Behavior and Organization

SN - 0167-2681

ER -