A NOTE ON THE IMPACT OF NEWS ON US HOUSEHOLD INFLATION EXPECTATIONS

Monthly disaggregated US data from 1978 to 2016 reveal that exposure to news on inflation and monetary policy helps to explain inflation expectations. This remains true when controlling for household personal characteristics, perceptions of government policy effectiveness, expectations of future int...

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Bibliographic Details
Published in:Macroeconomic dynamics 2020-06, Vol.24 (4), p.995-1015
Main Authors: Wang, Ben Zhe, Sheen, Jeffrey, Trück, Stefan, Chao, Shih-Kang, Härdle, Wolfgang Karl
Format: Article
Language:English
Subjects:
Economic theory
Macroeconomics
Monetary policy
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Summary:Monthly disaggregated US data from 1978 to 2016 reveal that exposure to news on inflation and monetary policy helps to explain inflation expectations. This remains true when controlling for household personal characteristics, perceptions of government policy effectiveness, expectations of future interest and unemployment rates, and sentiment. We find an asymmetric impact of news on inflation and monetary policy after 1983, with news on rising inflation and easier monetary policy having a stronger effect in comparison to news on lowering inflation and tightening monetary policy. Our results indicate the impact on inflation expectations of monetary policy news manifested through consumer sentiment during the lower bound period.
ISSN:1365-1005
1469-8056
DOI:10.1017/S1365100518000482