Narratives About the Macroeconomy

99 Pages Posted: 27 May 2022

See all articles by Peter Andre

Peter Andre

Leibniz Institute for Financial Research SAFE; Goethe University Frankfurt

Ingar Haaland

University of Bergen

Christopher Roth

University of Cologne

Johannes Wohlfart

University of Copenhagen

Multiple version iconThere are 3 versions of this paper

Date Written: May 1, 2022

Abstract

We provide evidence on narratives about the macroeconomy—the stories people tell to explain macroeconomic phenomena—in the context of a historic surge in inflation. We measure economic narratives in open-ended survey responses and represent them as Directed Acyclic Graphs. We apply this approach in surveys with more than 8,000 US households and 100 academic experts. We document three main findings. First, compared to experts, households’ narratives are coarser, focus less on the demand side, and are more likely to feature politically-loaded explanations. Second, households’ narratives strongly shape their inflation expectations, which we demonstrate with descriptive survey data and a series of experiments. Third, an experiment varying news consumption shows that the media is an important source of narratives. Our findings demonstrate the relevance of narratives for understanding macroeconomic expectation formation.

Suggested Citation

Andre, Peter and Haaland, Ingar and Roth, Christopher and Wohlfart, Johannes, Narratives About the Macroeconomy (May 1, 2022). CEPR Discussion Paper No. DP17305, Available at SSRN: https://ssrn.com/abstract=4121490

Peter Andre (Contact Author)

Leibniz Institute for Financial Research SAFE ( email )

House of Finance
Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323
Germany

Goethe University Frankfurt

Grüneburgplatz 1
Frankfurt am Main, 60323
Germany

Ingar Haaland

University of Bergen ( email )

Muséplassen 1
N-5008 Bergen, +47 55 58
Norway

Christopher Roth

University of Cologne ( email )

Albertus-Magnus-Platz
Cologne, 50923
Germany

Johannes Wohlfart

University of Copenhagen ( email )

Nørregade 10
Copenhagen, København DK-1165
Denmark

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