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

  • Ben Zhe Wang (a1), Jeffrey Sheen (a1), Stefan Trück (a1), Shih-Kang Chao (a2) and Wolfgang Karl Härdle (a3) (a4)...

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.

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Corresponding author

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

Footnotes

References

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

  • Ben Zhe Wang (a1), Jeffrey Sheen (a1), Stefan Trück (a1), Shih-Kang Chao (a2) and Wolfgang Karl Härdle (a3) (a4)...

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