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  • 1
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    Hamburg: Hamburg University, Department Socioeconomics
    Publication Date: 2020-01-22
    Description: In this paper we explore the degree of anchoring of consumers’ long-run inflation expectations. If expectations are firmly anchored, short- and long-run expectations should show no comovement in response to transitory shocks. Utilizing the University of Michigan Survey of Consumer’s rotating panel microstructure, we can identify changes in inflation expectations of individual consumers. Our results indicate that long-run inflation expectations became more anchored over time. While the degree of comovement fell significantly after 1996, the probability of a joint adjustment stayed constant. Regarding the possible determinants, we find that consumers’ rising interest rate expectations and perceived news on the monetary policy stance have a detrimental effect on the anchoring of long-run expectations. This effect is no longer present in the post-1996 period. Notably, a positive effect of perceived news on government debt on the degree of comovement emerges after 1996, alluding to a potentially problematic link between fiscal and monetary policy.
    Keywords: E31 ; E52 ; D84 ; ddc:330 ; Anchoring ; inflation expectations ; microdata
    Repository Name: EconStor: OA server of the German National Library of Economics - Leibniz Information Centre for Economics
    Language: English
    Type: doc-type:workingPaper
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  • 2
    Publication Date: 2020-01-22
    Description: Using the microdata of the Michigan Survey of Consumers, we evaluate whether U.S. consumers form macroeconomic expectations consistent with different economic concepts, namely the Phillips curve, the Taylor rule and the Income Fisher equation. We observe that 50% of the surveyed population have expectations consistent with the Income Fisher equation, 46% consistent with the Taylor rule and 34% are in line with the Phillips curve. However, only 6% of consumers form theory-consistent expectations with respect to all three concepts. For the Taylor rule and the Phillips curve we observe a cyclical pattern. For all three concepts we find significant differences across demographic groups. Evaluating determinants of consistency, we provide evidence that consumers are less consistent with the Phillips curve and the Taylor rule during recessions and with inflation higher than 2%. Moreover, consistency with respect to all three concepts is affected by changes in the communication policy of the Fed, where the strongest positive effect on consistency comes from the introduction of the official inflation target. Finally, consumers with theory-consistent expectations have lower absolute inflation forecast errors and are closer to professionals' inflation forecasts.
    Keywords: C25 ; D84 ; E31 ; ddc:330 ; Macroeconomic expectations ; microdata ; macroeconomic literacy ; central bank communication ; consumer forecast accuracy
    Repository Name: EconStor: OA server of the German National Library of Economics - Leibniz Information Centre for Economics
    Language: English
    Type: doc-type:workingPaper
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  • 3
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    Hamburg: Hamburg University, Department Socioeconomics
    Publication Date: 2020-01-22
    Description: There is a growing interest in studying the disagreement of economic agents. Most studies, however, focus on the disagreement regarding one specific variable, hereby neglecting that disagreement may be comoving with disagreement on other variables. In this paper we explore to which extent disagreement regarding the interest rate is driven by disagreement on inflation and on unemployment. This relationship can be motivated by the existence of the Taylor rule. Using micro survey data for both professional forecasters and consumers, we provide evidence that disagreement on the future interest rate is mainly driven by disagreement on inflation. Exploring further determinants, we confirm that central bank transparency as well as news on money and credit conditions significantly influence disagreement.
    Keywords: E31 ; E58 ; D84 ; C33 ; ddc:330 ; disagreement ; inflation expectations ; microdata
    Repository Name: EconStor: OA server of the German National Library of Economics - Leibniz Information Centre for Economics
    Language: English
    Type: doc-type:workingPaper
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  • 4
    Publication Date: 2018-06-26
    Description: Using the microdata of the Michigan Survey of Consumers, we evaluate whether U.S. consumers form macroeconomic expectations consistent with different economic concepts. We check whether their expectations are in line with the Phillips Curve, the Taylor Rule and the Income Fisher Equation. We observe that 50% of the surveyed population have expectations consistent with the Income Fisher equation and the Taylor Rule, while 25% are in line with the Phillips Curve. However, only 6% of consumers form theory-consistent expectations with respect to all three concepts. For the Taylor Rule and the Phillips curve we observe a strong cyclical pattern. For all three concepts we find significant differences across demographic groups. Evaluating determinants of consistency, we provide evidence that the likelihood of having theory-consistent expectations with respect to the Phillips curve and the Taylor rule falls during recessions and with inflation higher than 2%. Moreover, consistency with respect to all three concepts is affected by changes in the communication policy of the Fed, where the strongest positive effect on consistency comes from the introduction of the official inflation target. Finally, we show that consumers with theory-consistent expectations have lower absolute inflation forecast errors and are closer to professionals' inflation forecasts.
    Keywords: C25 ; D84 ; E31 ; ddc:330 ; macroeconomic expectations ; microdata ; macroeconomic literacy ; central bank communication ; consumer forecast accuracy
    Repository Name: EconStor: OA server of the German National Library of Economics - Leibniz Information Centre for Economics
    Language: English
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  • 5
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    Unknown
    Zurich: ETH Zurich, KOF Swiss Economic Institute
    Publication Date: 2018-06-26
    Description: There is a growing interest in studying the disagreement of economic agents. Most studies, however, focus on the disagreement regarding one specific variable, hereby neglecting that disagreement may be comoving with disagreement on other variables. In this paper we explore to which extent disagreement regarding the interest rate is driven by disagreement on inflation and on unemployment. This relationship can be motivated by the existence of the Taylor rule. Using micro survey data for both professional forecasters and consumers, we provide evidence that disagreement on the future interest rate is mainly driven by disagreement on inflation. Exploring further determinants, we confirm that central bank transparency as well as news on money and credit conditions significantly influence disagreement.
    Keywords: E31 ; E58 ; D84 ; C33 ; ddc:330 ; Disagreement ; Taylor rule ; interest rate expectations ; inflation expectations ; unemployment expectations ; microdata
    Repository Name: EconStor: OA server of the German National Library of Economics - Leibniz Information Centre for Economics
    Language: English
    Type: doc-type:workingPaper
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  • 6
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    Unknown
    Zurich: ETH Zurich, KOF Swiss Economic Institute
    Publication Date: 2018-06-26
    Description: In this paper we explore the degree of anchoring of consumers' long-run inflation expectations. If expectations are firmly anchored, short- and long-run expectations should show no comovement in response to transitory shocks. Utilizing the University of Michigan Survey of Consumer's rotating panel microstructure, we can identify changes in inflation expectations of individual consumers over time. Our results indicate that long-run inflation expectations became more anchored over the last decades. While the degree of comovement fell significantly after 1996, the probability of a joint adjustment stayed constant. Regarding the possible determinants, we find that consumers' rising interest rate expectations and perceived news on the monetary policy stance have a detrimental effect on the anchoring of long-run expectations. This effect is no longer present in the post-1996 period. Notably, a positive effect of perceived news on government debt on the degree of comovement emerges after 1996, alluding to a potentially problematic link between fiscal and monetary policy.
    Keywords: E52 ; D84 ; ddc:330 ; Anchoring ; inflation expectations ; microdata ; news ; Inflationserwartung ; Mikrodaten ; Michigan
    Repository Name: EconStor: OA server of the German National Library of Economics - Leibniz Information Centre for Economics
    Language: English
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  • 7
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    Unknown
    Zurich: ETH Zurich, KOF Swiss Economic Institute
    Publication Date: 2018-06-26
    Description: While there is ample evidence how central bank communication and interest rate decisions are perceived by financial markets, insights regarding the response of the public is lacking. Media is known to be an important transmitter of news to the public. Based on articles in the Financial Times Europe, we test how expectations on the future course of monetary policy presented in the media are affected by central bank communication and interest rate decisions.
    Keywords: E52 ; E58 ; ddc:330 ; European Central Bank ; monetary policy announcements ; central bank communication ; media expectations ; Zinspolitik ; Staatliche Information ; Zentralbank ; EU-Staaten
    Repository Name: EconStor: OA server of the German National Library of Economics - Leibniz Information Centre for Economics
    Language: English
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  • 8
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    Unknown
    Zurich: ETH Zurich, KOF Swiss Economic Institute
    Publication Date: 2018-06-26
    Description: This paper analyzes the impact of the media on consumers' inflation expectations. We distinguish two channels through which media can influence expectations. First, the intensity of news coverage on inflation plays a role (volume channel). Second, the content of these reports matters (tone channel). Employing a unique data set capturing media reports on inflation in Germany comprising 01/1998-12/2006 we are able to discriminate between these two effects. We find that the volume effect generally improves the accuracy of consumer forecasts while the tone channel induces a media bias.
    Keywords: E52 ; D83 ; ddc:330 ; Monetary policy ; expectation formation ; media coverage ; media bias ; Inflationserwartung ; Medienverhalten ; Informationsbeschaffung ; Bias ; Deutschland
    Repository Name: EconStor: OA server of the German National Library of Economics - Leibniz Information Centre for Economics
    Language: English
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  • 9
    Publication Date: 2018-06-26
    Description: This paper investigates the effects of media coverage and macroeconomic conditions 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 content of news stories (tone) but is unaffected by reporting intensity (volume) and by the heterogeneity of story content (information entropy). Disagreement of professionals does not depend on media coverage. With respect to the influence of macroeconomic variables we provide evidence that disagreement of households and professionals primarily depends on the current rate of inflation.
    Keywords: E31 ; E37 ; D83 ; ddc:330 ; forecast disagreement ; inflation expectations ; media coverage ; Bayesian learning ; Inflationserwartung ; Medienverhalten ; Privater Haushalt ; Vergleich ; Prognose ; Sachverständige ; Bayes-Statistik ; Deutschland
    Repository Name: EconStor: OA server of the German National Library of Economics - Leibniz Information Centre for Economics
    Language: English
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  • 10
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    Unknown
    Zurich: ETH Zurich, KOF Swiss Economic Institute
    Publication Date: 2018-06-26
    Description: This paper analyzes European financial markets' comprehension and interpretation of ECB communication signals. By applying a novel indicator developed by Berger et al. (2006), that quantifies the contents of the ECB's introductory statements, we find that communication affects the term structure of interest rates in the medium run over a horizon between five months to one year. Our results suggest that financial market agents expect the ECB to prepare them for a change in interest rates well in advance. However, judging upon the dynamics of the response, the exact timing of a decision is less foreseeable. Disentangling the effects of ECB statements on prices, the real and the monetary sector, we provide evidence that especially the ECB's interpretation and forecasts of price developments represent important news to financial market agents.
    Keywords: E43 ; E44 ; E58 ; ddc:330 ; Central Bank Communication ; Expectations ; Term Structure of Interest Rates ; Yield Curve ; ECB ; Zentralbank ; Öffentlichkeitsarbeit ; Informationsverbreitung ; Zinsstruktur
    Repository Name: EconStor: OA server of the German National Library of Economics - Leibniz Information Centre for Economics
    Language: English
    Type: doc-type:workingPaper
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