For insightful and constructive comments, we thank Pok-sang Lam, the editor, and two anonymous referees. We also thank Jörg Breitung, Christian Conrad, Heiner Mikosch, Jan-Egbert Sturm, as well as participants of the European Economic Association Meeting, Barcelona, Spain; the 5th Macroeconomic Research Meeting, Tübingen, Germany; and the 3rd Young Swiss Economists Meeting, Berne, Switzerland, for helpful comments. Financial support by the Swiss National Science Foundation (SNF) is gratefully acknowledged. The views expressed in this paper reflect solely the views of the authors and not necessarily those of the Swiss National Bank nor the KOF.
The Role of Media for Inflation Forecast Disagreement of Households and Professional Forecasters
Article first published online: 19 SEP 2012
© 2012 The Ohio State University
Journal of Money, Credit and Banking
Volume 44, Issue 7, pages 1325–1350, October 2012
How to Cite
LAMLA, M. J. and MAAG, T. (2012), The Role of Media for Inflation Forecast Disagreement of Households and Professional Forecasters. Journal of Money, Credit and Banking, 44: 1325–1350. doi: 10.1111/j.1538-4616.2012.00534.x
- Issue published online: 19 SEP 2012
- Article first published online: 19 SEP 2012
- Received July 10, 2009; and accepted in revised from February 15, 2012.
- forecast disagreement;
- inflation expectations;
- media coverage
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.