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A Note On The Impact Of News On Us Household Inflation Expectations

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  • Wang, Ben Zhe
  • Sheen, Jeffrey
  • Trück, Stefan
  • Chao, Shih-Kang
  • Härdle, Wolfgang Karl

Abstract

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.

Suggested Citation

  • Wang, Ben Zhe & Sheen, Jeffrey & Trück, Stefan & Chao, Shih-Kang & Härdle, Wolfgang Karl, 2020. "A Note On The Impact Of News On Us Household Inflation Expectations," Macroeconomic Dynamics, Cambridge University Press, vol. 24(4), pages 995-1015, June.
    • Handle: RePEc:cup:macdyn:v:24:y:2020:i:4:p:995-1015_9
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    References listed on IDEAS

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    Cited by:

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    3. Nicolas Reigl, 2023. "Noise shocks and business cycle fluctuations in three major European Economies," Empirical Economics, Springer, vol. 64(2), pages 603-657, February.

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