The role of media for consumers' inflation expectation formation

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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.
Original languageEnglish
JournalJournal of Economic Behavior and Organization
Volume106
Pages (from-to)62-77
Number of pages16
ISSN0167-2681
DOIs
Publication statusPublished - 10.2014
Externally publishedYes

    Research areas

  • Economics - Imperfect information, Inflation expectations formation, Media

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