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

Research output: Contribution to journalArticle

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 languageEnglish
JournalMacroeconomic Dynamics
DOIs
Publication statusE-pub ahead of print - 14 Nov 2018

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Keywords

  • Inflation Expectations
  • Monetary Policy place with Communication
  • News Impact

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