Seminar

We investigate the role played by the media in the expectations formation process of households. Using a novel news-topic-based approach we show that the news types the media choose to report on are good predictors of households' stated ination expectations. In turn, in a noisy information model setting, augmented with a simple media channel, we show that the underlying time series properties of relevant news topics explain the time-varying information rigidity among households. As such, we not only provide a new estimate on the degree of time variation in households' information rigidity, but also provide, using a large news corpus and machine learning algorithms, robust and new evidence highlighting the role of the media for understanding ination expectations and information rigidities.