Inflation Perceptions and Expectations in the Euro Area: The Role of News

40 Pages Posted: 10 Sep 2009

See all articles by Cristian Badarinza

Cristian Badarinza

National University of Singapore (NUS)

Marco Buchmann

European Central Bank (ECB)

Date Written: September 9, 2009

Abstract

The aim of this study is to assess empirically to what extent the degree of heterogeneity of consumers’ inflation perceptions and expectations is driven by the flow of information related to current and future price developments in the euro area. We conduct the analysis both on an aggregate level for the euro area as well as for a set of countries using panel techniques. We find that the degree to which consumers’ expectations are discordant is negatively related to news intensity. Moreover, the results suggest that the absolute bias in expectations decreases as news become more intense and this effect has become more pronounced since the introduction of the common currency.

Keywords: Inflation Expectations, Heterogeneity, Survey data, Euro Area, News

JEL Classification: D12, D84, E31

Suggested Citation

Badarinza, Cristian and Buchmann, Marco, Inflation Perceptions and Expectations in the Euro Area: The Role of News (September 9, 2009). ECB Working Paper No. 1088. Available at SSRN: https://ssrn.com/abstract=1457631

Cristian Badarinza

National University of Singapore (NUS) ( email )

Bukit Timah Road 469 G
Singapore, 117591
Singapore

Marco Buchmann (Contact Author)

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

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