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INFORMATION RIGIDITIES, INFLATION PERCEPTIONS, AND THE MEDIA: LESSONS FROM THE EURO CASH CHANGEOVER
Author(s) -
Lamla Michael J.,
Lein Sarah M.
Publication year - 2015
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/ecin.12121
Subject(s) - changeover , inflation (cosmology) , cash , economics , perception , divergence (linguistics) , monetary economics , set (abstract data type) , macroeconomics , computer science , psychology , telecommunications , transmission (telecommunications) , programming language , linguistics , philosophy , physics , neuroscience , theoretical physics
The objective of theoretical models of information rigidities is to capture the fact that people are constrained in their ability to acquire and process all available information. Given that most people obtain their information about the economy from the media, press coverage of the economy may exert an influence on peoples' attitudes. This paper tests for this influence by examining consumers' inflation perceptions in the aftermath of the euro cash changeover, which serves as a natural experiment. Using a new data set, that quantifies the intensity and tone of media reports, we document that media reporting has had a statistically significant and economically meaningful impact on inflation perceptions and contributed to their sharp rise in the aftermath of the euro cash changeover and to the divergence between inflation perceptions and actual inflation rates . ( JEL E53, D83)