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The Role of Media for Inflation Forecast Disagreement of Households and Professional Forecasters
Author(s) -
LAMLA MICHAEL J.,
MAAG THOMAS
Publication year - 2012
Publication title -
journal of money, credit and banking
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.763
H-Index - 108
eISSN - 1538-4616
pISSN - 0022-2879
DOI - 10.1111/j.1538-4616.2012.00534.x
Subject(s) - economics , inflation (cosmology) , survey of professional forecasters , volatility (finance) , econometrics , media coverage , monetary economics , german , inflation rate , bayesian vector autoregression , monetary policy , bayesian probability , statistics , mathematics , theoretical physics , history , media studies , physics , archaeology , sociology
This paper investigates the effects of media coverage about consumer price inflation on inflation forecast disagreement of German households and professional forecasters. We adopt a Bayesian learning model in which media coverage of inflation affects forecast disagreement by influencing information sets as well as predictor choice. Our empirical results show that disagreement of households depends on the heterogeneity of story content and on the reporting intensity, especially of news on rising inflation. Disagreement of professional forecasters does not depend on media coverage. With respect to the influence of macroeconomic variables, we provide evidence that disagreement of professional forecasters primarily depends on the inflation rate and on inflation volatility. The response of households to inflation is much less pronounced.