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A German inflation narrative. How the media frame price dynamics: Results from a RollingLDA analysis

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  • Müller, Henrik
  • Schmidt, Tobias
  • Rieger, Jonas
  • Hufnagel, Lena Marie
  • Hornig, Nico

Abstract

In this paper, we present a new indicator to measure the media coverage of inflation. Our Inflation Perception Indicator (IPI) for Germany is based on a corpus of three million articles published by broadsheet newspapers between January 2001 and February 2022. It is designed to detect thematic trends, thereby providing new insights into the dynamics of inflation perception over time. These results may prove particularly valuable at the current juncture, where massive uncertainty prevails due to geopolitical conflicts and the pandemic-related supply-chain jitters. Economists inspired by Shiller (2017; 2020) have called for analyses of economic narratives to complement econometric analyses. The IPI operationalizes such an approach by isolating inflation narratives circulating in the media. Methodically, the IPI makes use of RollingLDA (Rieger et al. 2021), a dynamic topic modeling approach refining the rather static original LDA (Blei et al. 2003) to allow for changes in the model's structure over time. By modeling the process of collective memory, where experiences of the past are partly overwritten and altered by new ones and partly sink into oblivion, RollingLDA is a potent tool to capture the evolution of economic narratives as social phenomena. In addition, it is suitable to produce stable time-series, to the effect that the IPI can be updated frequently. Our initial results show a narrative landscape in turmoil. Never in the past two decades has there been such a broad shift in inflation perception, and therefore, possibly, in inflation expectations. Also, second-round effects, such as significant wage demands, that have not played a major role in Germany for a long time, seem to be in the making. Towards the end of the time horizon, raw material prices are high on the agenda, too, triggered by the Russian war against Ukraine and the ensuing sanctions against the aggressor. We would like to encourage researchers to use our data and are happy to share it on request.

Suggested Citation

  • Müller, Henrik & Schmidt, Tobias & Rieger, Jonas & Hufnagel, Lena Marie & Hornig, Nico, 2022. "A German inflation narrative. How the media frame price dynamics: Results from a RollingLDA analysis," DoCMA Working Papers 9, TU Dortmund University, Dortmund Center for Data-based Media Analysis (DoCMA).
    • Handle: RePEc:zbw:docmaw:9
    DOI: 10.17877/DE290R-22632
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    1. Larsen, Vegard H. & Thorsrud, Leif Anders & Zhulanova, Julia, 2021. "News-driven inflation expectations and information rigidities," Journal of Monetary Economics, Elsevier, vol. 117(C), pages 507-520.
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    Cited by:

    1. Schmidt, Torsten & Barabas, György & Benner, Niklas & Blagov, Boris & Dirks, Maximilian & Grozea-Helmenstein, Daniela & Isaak, Niklas & Jessen, Robin & Kirsch, Florian & Schacht, Philip & Weyerstraß, , 2022. "Die wirtschaftliche Entwicklung im Inland: Inflationsschub lässt Produktion zurückgehen," RWI Konjunkturberichte, RWI - Leibniz-Institut für Wirtschaftsforschung, vol. 73(3), pages 5-51.
    2. Olivier De Bandt & Jean-Charles Bricongne & Julien Denes & Alexandre Dhenin & Annabelle De Gaye & Pierre-Antoine Robert, 2023. "Using the Press to Construct a New Indicator of Inflation Perceptions in France," Working papers 921, Banque de France.
    3. Müller, Henrik & Rieger, Jonas & Schmidt, Tobias & Hornig, Nico, 2022. "Pressure is high - and rising: The Inflation Perception Indicator (IPI) to 30 April 2022 - a research note analysis," DoCMA Working Papers 10, TU Dortmund University, Dortmund Center for Data-based Media Analysis (DoCMA).
    4. Lange, Kai-Robin & Reccius, Matthias & Schmidt, Tobias & Müller, Henrik & Roos, Michael W. M. & Jentsch, Carsten, 2022. "Towards extracting collective economic narratives from texts," Ruhr Economic Papers 963, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    5. Müller, Henrik & Schmidt, Tobias & Rieger, Jonas & Hornig, Nico & Hufnagel, Lena Marie, 2023. "The inflation attention cycle: Updating the Inflation Perception Indicator (IPI) up to February 2023. A research note," DoCMA Working Papers 13, TU Dortmund University, Dortmund Center for Data-based Media Analysis (DoCMA).

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    Keywords

    Inflation; Expectations; Narratives; Latent Dirichlet Allocation; Covid-19; Text Mining; Computational Methods; Behavioral Economics;
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