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A NOTE ON THE IMPACT OF NEWS ON US HOUSEHOLD INFLATION EXPECTATIONS

Published online by Cambridge University Press:  14 November 2018

Ben Zhe Wang ,
Jeffrey Sheen ,
Stefan Trück ,
Shih-Kang Chao  and
Wolfgang Karl Härdle
Ben Zhe Wang*
Affiliation:
Macquarie University
Jeffrey Sheen
Affiliation:
Macquarie University
Stefan Trück
Affiliation:
Macquarie University
Shih-Kang Chao
Affiliation:
University of Missouri
Wolfgang Karl Härdle
Affiliation:
Humboldt-Universität zu Berlin Singapore Management University
*
Address correspondence to: Ben Zhe Wang, 4ER 432, Department of Economics, Macquarie University, North Ryde, 2109, NSW, Australia; e-mail: ben.wang@mq.edu.au. Phone: +61 2 98508500.
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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.

Keywords

Inflation ExpectationsNews ImpactMonetary Policy place with Communication
Type
Note
Information
Macroeconomic Dynamics , Volume 24 , Issue 4 , June 2020 , pp. 995 - 1015
Copyright
© Cambridge University Press 2018

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Footnotes

We thank the editor and the two anonymous referees for their constructive comments.

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