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Disentangling the Relationship between News Media and Consumers' Inflation Sentiment: the Case of Croatia

Author

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  • Ivana Lolic

    (Department of Statistics, Faculty of Economics & Business Zagreb, University of Zagreb, Zagreb)

  • Petar Soric

    (Department of Statistics, Faculty of Economics & Business Zagreb, University of Zagreb, Zagreb)

  • Mirjana Cizmesija

    (Department of Statistics, Faculty of Economics & Business Zagreb, University of Zagreb, Zagreb)

Abstract

Apart from phenomenon of the “euro-induced price perception gap” in the euro area in 2002, the impact of media reporting on inflation tendencies is underexplored in the literature. Therefore, this paper tries to examine the influence of media content on the accuracy of consumers’ inflation perceptions and expectations in Croatia during the period 2007–2014. The authors obtain a unique database of articles from the archives of three leading Croatian news websites. The authors find that the content and tone of inflation-related articles significantly influence consumers’ ability to assess inflation accurately. The evidence is the most convincing in the aftermath of Croatian EU accession, when a considerable gap has emerged between consumers’ inflation sentiment and the official inflation rates. This is strikingly similar to the “euro-induced price perception gap” in 2002.

Suggested Citation

  • Ivana Lolic & Petar Soric & Mirjana Cizmesija, 2017. "Disentangling the Relationship between News Media and Consumers' Inflation Sentiment: the Case of Croatia," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 67(3), pages 221-249, June.
    • Handle: RePEc:fau:fauart:v:67:y:2017:i:3:p:221-249
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    More about this item

    Keywords

    inflation expectations; consumer surveys; state-space model; time-varying parameters; news media;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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