We would like to thank the Editor, Pok-sang Lam, two anonymous referees, and Tiago Cavalcanti, Jagjit Chadha, Roberta Distante, Chryssi Giannitsarou, Sean Holly, Cars Hommes, Seppo Honkapohja, Ivan Petrella, and other participants in seminars and presentations at the University of Cambridge, Catholic University of Milan, University of Copenhagen, the Federal Reserve Board, Koc University, New Orleans University, Norges Bank, the IUE Conference (2007), the MMF Conference (2007), the Midwest Macroeconomics Meetings (2012), and the Workshop on Models of Expectation Formation and the Role of the News Media for Information Transmission at the University of Hamburg (2012) for their constructive comments. All remaining errors are our own.
News on Inflation and the Epidemiology of Inflation Expectations
Article first published online: 15 AUG 2013
© 2013 The Ohio State University
Journal of Money, Credit and Banking
Volume 45, Issue 6, pages 1045–1067, September 2013
How to Cite
PFAJFAR, D. and SANTORO, E. (2013), News on Inflation and the Epidemiology of Inflation Expectations. Journal of Money, Credit and Banking, 45: 1045–1067. doi: 10.1111/jmcb.12043
- Issue published online: 15 AUG 2013
- Article first published online: 15 AUG 2013
- Manuscript Accepted: 23 AUG 2012
- Manuscript Received: 25 NOV 2011
- survey expectations;
- news on inflation;
- information stickiness
This paper examines the nexus between news coverage on inflation and households’ inflation expectations. In doing so, we test the epidemiological foundations of the sticky information model (Carroll ). We use both aggregate and household-level data from the Survey Research Center at the University of Michigan. We highlight a fundamental disconnection among news on inflation, consumers’ frequency of expectation updating, and the accuracy of their expectations. Our evidence provides at best weak support to the epidemiological framework, as most of the consumers who update their expectations do not revise them toward professional forecasters’ mean forecast.