Does the Media Help the General Public in Understanding Inflation?

Abstract

This paper studies whether media information helps the general public in understanding inflation. We combine detailed Dutch household survey data on media usage, inflation perceptions, and inflation expectations. We find no evidence that more‐often informed members of the general public do better in understanding inflation. In fact, more frequent readership of popular newspapers is associated with slightly less accurate inflation perceptions. There is also no evidence that usage of non‐print media leads to more accurate of views on inflation. One implication of these results is that central banks might need to consider more direct ways of engaging with the general public.

The Role of Reading Economic News in Germany and the UK

“…A recent study using cognitive mapping has shown that while general news consumption is connected to a lower complex understanding of the Global Financial Crisis 2007-2009 (GFC) among Dutch citizens, news uses specifically dealing with the GFC are related to higher cognitive complexity when making sense about the GFC but only among the less-educated citizens [46]. Conversely, another study conducted in the Netherlands implies that more news consumption is not necessarily correlated with a better understanding of economic indicators, such as inflation [56]. However, it should be noted here that reading popular newspapers does not guarantee that one comes across or actively consumes economic information.…”

Breaking Monetary Policy News: The Role of Mass Media Coverage of ECB Announcements for Public Inflation Expectations

“…Data from the trans-European Eurobarometer surveys show that citizens in all Member States continue to regard television as their preferred source of news, both for national and European politics, with 77% and 72% respectively (Eurobarometer 86, fall 2016). Television also remains an important source of economic news, including information on price developments, monetary policy (e.g., Jansen and Neuenkirch, 2018;D'Acunto et al, 2019) and information on the ECB (e.g., Hayo and Neuenkirch, 2018;Conrad et al, 2021). At the same time, trust in the medium remains high, which, in addition to easy access to information and the (pre)selection of the most important news, is likely to play a decisive role in the continuing importance of television.…”

Forecasting with news sentiment: Evidence with UK newspapers

“…There has also been developments of forecasting models for economic activity using textual techniques on mainstream or focussed media (see for instance Sharpe et al (2017), Larsen and Thorsrud (2019), Garz (2013), Starr (2012). Lamla and Maag (2012) Lamla and Lein (2014), Dräger (2015), Pfaj-90 far and Santoro (2013), Jansen and Neuenkirch (2018) also analysed the relationship between inflation expectations and the media. For a more indepth analysis of the use of textual models, Gentzkow et al (2019) offers a comprehensive survey on the various uses of text data.…”