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

Research output: Contribution to journalArticleResearchpeer-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 languageEnglish
Pages (from-to)995-1015
Number of pages21
JournalMacroeconomic Dynamics
Volume24
Issue number4
Early online date14 Nov 2018
DOIs
Publication statusPublished - Jun 2020

Keywords

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

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