A note on the impact of news on US household inflation expectations

Ben Zhe Wang; Jeffrey Sheen; Stefan Trück; Shih Kang Chao; Wolfgang Karl Härdle

doi:10.1017/S1365100518000482

A note on the impact of news on US household inflation expectations

Ben Zhe Wang^*, Jeffrey Sheen, Stefan Trück, Shih Kang Chao, Wolfgang Karl Härdle

^*Corresponding author for this work

Department of Economics

Research output: Contribution to journal › Article › peer-review

Abstract

Monthly disaggregated US data from 1978 to 2016 reveal that exposure to news on inflation and monetary policy helps to explain inflation expectations. This remains true when controlling for household personal characteristics, perceptions of government policy effectiveness, expectations of future interest and unemployment rates, and sentiment. We find an asymmetric impact of news on inflation and monetary policy after 1983, with news on rising inflation and easier monetary policy having a stronger effect in comparison to news on lowering inflation and tightening monetary policy. Our results indicate the impact on inflation expectations of monetary policy news manifested through consumer sentiment during the lower bound period.

Original language	English
Pages (from-to)	995-1015
Number of pages	21
Journal	Macroeconomic Dynamics
Volume	24
Issue number	4
Early online date	14 Nov 2018
DOIs	https://doi.org/10.1017/S1365100518000482
Publication status	Published - Jun 2020

Keywords

Inflation Expectations
Monetary Policy place with Communication
News Impact

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10.1017/S1365100518000482

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title = "A note on the impact of news on US household inflation expectations",

abstract = "Monthly disaggregated US data from 1978 to 2016 reveal that exposure to news on inflation and monetary policy helps to explain inflation expectations. This remains true when controlling for household personal characteristics, perceptions of government policy effectiveness, expectations of future interest and unemployment rates, and sentiment. We find an asymmetric impact of news on inflation and monetary policy after 1983, with news on rising inflation and easier monetary policy having a stronger effect in comparison to news on lowering inflation and tightening monetary policy. Our results indicate the impact on inflation expectations of monetary policy news manifested through consumer sentiment during the lower bound period.",

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AB - Monthly disaggregated US data from 1978 to 2016 reveal that exposure to news on inflation and monetary policy helps to explain inflation expectations. This remains true when controlling for household personal characteristics, perceptions of government policy effectiveness, expectations of future interest and unemployment rates, and sentiment. We find an asymmetric impact of news on inflation and monetary policy after 1983, with news on rising inflation and easier monetary policy having a stronger effect in comparison to news on lowering inflation and tightening monetary policy. Our results indicate the impact on inflation expectations of monetary policy news manifested through consumer sentiment during the lower bound period.

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A note on the impact of news on US household inflation expectations

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Keywords

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