News on Inflation and the Epidemiology of Inflation Expectations
Center Discussion Paper Series No. 2012-048
47 Pages Posted: 16 Jun 2012
Date Written: May 30, 2012
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, 2003, 2006). We use both aggregate and household-level data from the Survey Research Center at the University of Michigan. We highlight a fundamental disconnection between 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 towards professional forecasters' mean forecast.
Keywords: Inflation, Survey Expectations, News, Information Stickiness
JEL Classification: C53, D84, E31
Suggested Citation: Suggested Citation