The Role of Media for Inflation Forecast Disagreement of Households and Professional Forecasters

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Authors

This paper investigates the effects of media coverage about consumer price inflation on inflation forecast disagreement of German households and professional forecasters. We adopt a Bayesian learning model in which media coverage of inflation affects forecast disagreement by influencing information sets as well as predictor choice. Our empirical results show that disagreement of households depends on the heterogeneity of story content and on the reporting intensity, especially of news on rising inflation. Disagreement of professional forecasters does not depend on media coverage. With respect to the influence of macroeconomic variables, we provide evidence that disagreement of professional forecasters primarily depends on the inflation rate and on inflation volatility. The response of households to inflation is much less pronounced.

Original languageEnglish
JournalJournal of Money, Credit and Banking
Volume44
Issue number7
Pages (from-to)1325-1350
Number of pages26
ISSN0022-2879
DOIs
Publication statusPublished - 01.10.2012
Externally publishedYes

    Research areas

  • Economics - Forecast disagreement, Inflation expectations, Media coverage