News-driven inflation expectations and information rigidities

Larsen, Vegard H.; Thorsrud, Leif Anders; Zhulanova, Julia

doi:10.1016/j.jmoneco.2020.03.004

Cited by 88 publications

(64 citation statements)

References 29 publications

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“…The change point analysis shows that some aggregate news events generate notable and immediate changes in aggregate household sentiment. This finding seems consistent with Nimark and Pitschner (2019), who show that major events shift the general news focus and make media coverage more homogeneous, and with evidence that consumers update expectations much more frequently during periods of high media coverage (Doms and Morin 2004;Larsen, Thorsrud, and Zhulanova 2019). 17 Many of the events in Table 1 also coincide with large changes in asset prices that likely attract additional attention.…”

Section: Confidence Shifts Following Major News Eventssupporting

confidence: 82%

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Do Monetary Policy Announcements Shift Household Expectations?

Lewis¹,

Makridis²,

Mertens³

2020

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We use a decade of daily survey data from Gallup to study how monetary policy influences households' beliefs about economic conditions. We first document that public confidence in the state of the economy reacts instantaneously to certain types of macroeconomic news. Next, we show that surprises to the Federal Funds target rate are among the news that have statistically significant and instantaneous effects on economic confidence. Specifically, we find that a surprise increase in the target rate robustly leads to an immediate decline in household confidence, at odds with previous findings that suggest consumers are largely inattentive to economic developments. Monetary policy news about forward guidance and asset purchases does not have similarly clear and robust immediate effects on household beliefs. We document heterogeneity across demographics in the responsiveness of macroeconomic beliefs to aggregate news, and we relate our findings to existing evidence on informational rigidities.

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Section: Confidence Shifts Following Major News Eventssupporting

confidence: 82%

“…See for instanceCarroll (2003),Doms and Morin (2004),Ehrmann, Pfajfar, and Santoro (2017),and Larsen, Thorsrud, and Zhulanova (2019).…”

mentioning

confidence: 99%

Do Monetary Policy Announcements Shift Household Expectations?

Lewis¹,

Makridis²,

Mertens³

2020

View full text Add to dashboard Cite

show abstract

“…The change point analysis offers a first piece of evidence that aggregate news events can generate notable and immediate changes in aggregate household sentiment about the economy. This finding seems consistent with Nimark and Pitschner (2019), who show that major events shift the general news focus and make media coverage more homogeneous, and evidence that consumers update expectations much more frequently during periods of high media coverage (Doms and Morin 2004;Larsen, Thorsrud, and Zhulanova 2019). Some of the events in Table 1 also coincide with large changes in asset prices that likely attract additional attention.…”

Section: Confidence Shifts Following Major News Eventssupporting

confidence: 80%

“…After estimating and rescaling responses for the 2008-2012 sample, we also find larger response to our baseline shocks.20 See for instanceCarroll (2003),Doms and Morin (2004),Ehrmann, Pfajfar, and Santoro (2017),and Larsen, Thorsrud, and Zhulanova (2019) …”

mentioning

confidence: 65%

Do Monetary Policy Announcements Shift Household Expectations?

Lewis¹,

Makridis²,

Mertens³

2019

View full text Add to dashboard Cite

We use daily survey data from Gallup to assess whether households' beliefs about economic conditions are influenced by surprises in monetary policy announcements. We first provide more general evidence that public confidence in the state of the economy reacts to certain types of macroeconomic news very quickly. Next, we show that surprises to the Federal Funds target rate are among the news that have statistically significant and instantaneous effects on economic confidence. In contrast, surprises about forward guidance and asset purchases do not have similar effects on household beliefs, perhaps because they are less well understood. We document heterogeneity in the responsiveness of sentiment across demographics.

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“…On the contrary, Larsen et al . (2020) argue that many news topics are, in their case, of interest to form inflation expectations, and thus, it would be limiting to only target media mentioning terms related to inflation. Kelly et al .…”

Section: Preprocessing Enrichment and Selection Of Qualitative Sentmentioning

confidence: 99%

Econometrics Meets Sentiment: An Overview of Methodology and Applications

Algaba

Ardia

Bluteau³

et al. 2020

Journal of Economic Surveys

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The advent of massive amounts of textual, audio, and visual data has spurred the development of econometric methodology to transform qualitative sentiment data into quantitative sentiment variables, and to use those variables in an econometric analysis of the relationships between sentiment and other variables. We survey this emerging research field and refer to it as sentometrics, which is a portmanteau of sentiment and econometrics. We provide a synthesis of the relevant methodological approaches, illustrate with empirical results, and discuss useful software.

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News-driven inflation expectations and information rigidities

Cited by 88 publications

References 29 publications

Do Monetary Policy Announcements Shift Household Expectations?

Do Monetary Policy Announcements Shift Household Expectations?

Do Monetary Policy Announcements Shift Household Expectations?

Econometrics Meets Sentiment: An Overview of Methodology and Applications

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