News Selection and Household Inflation Expectations

Chahrour, Ryan; Shapiro, Adam Hale; Wilson, Daniel J.

doi:10.24148/wp2024-31

Working Paper

News Selection and Household Inflation Expectations

Abstract: We examine the impact of systematic media reporting on household inflation expectations, focusing on how selective news coverage influences household responses to inflation news. In a model where monitoring all economic developments is costly, households will account for news selection when forming inflation expectations. The model implies an asymmetry: news about high inflation influences inflation expectations more than news about low inflation. Using micro panel data, we find support for this hypothesis. Exposure to news about higher prices increases household inflation expectations by approximately 0.4 percentage point, whereas exposure to news about lower prices has no discernible effect.

Keywords: inflation expectations; news; media; selection;

JEL Classification: E3; D84;

https://doi.org/10.24148/wp2024-31