Economic Data Misperceptions in Political Discourse
35 Pages Posted: 2 Oct 2015
Date Written: October 1, 2015
In recent years, misperceptions of important economic data such as the inflation and unemployment rates have become common in political discourse. For example, Republican presidential candidate Donald Trump has repeatedly said the true unemployment rate is 42 percent, and it is very common for people to assert that the true inflation rate is much higher than the official rate. While there is no sign yet that such misperceptions have affected policy, it may be a factor driving the Federal Reserve to preemptively tighten monetary policy. While Fed officials are perfectly well aware that all measures of inflation are well-behaved, they may have tired of the constant drumbeat of warnings that inflation, even hyperinflation, is right around the corner and wish to mute them. This is a matter of concern because Fed tightening has generally precipitated postwar recessions.
Keywords: inflation rate, unemployment rate, Federal Reserve, Ben Bernanke, Donald Trump
JEL Classification: C40, E31, E32, E52, E58, J21
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