News coverage affects inflation expectations – NBER paper
Authors say bad news has bigger impact on perceptions of inflation
A study of how news media affects inflation expectations in the US finds there is a causal link, but that the effect is stronger when inflation comes in higher than predicted.
The authors – Carola Binder, Pascal Frank and Jane Ryngaert – focus on release days for consumer price index (CPI) reports and assess the degree of “surprise” relative to the consensus forecast. Doing so enables them to control for the fact that people tend to demand more news when inflation is higher.
The authors show that
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