Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
7243448 | Journal of Economic Behavior & Organization | 2014 | 33 Pages |
Abstract
The full-information rational expectations model is clearly rejected by the data. The expectation formation process has therefore important implications for macroeconomic outcomes. We examine how consumers react to information provided by the media, by taking into account that this information is imperfect. We show that information rigidities play a role empirically. Intensive news reporting improves the accuracy of consumers' inflation expectations, because they receive more information. However, this effect depends on the tone of the news. If news are badly toned, the effect reverts.
Keywords
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Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Michael J. Lamla, Sarah M. Lein,