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Volume 67, Issue 3

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Disentangling the Relationship between News Media and Consumers' Inflation Sentiment: the Case of Croatia

Čižmešija, Mirjana; Lolić, Ivana; Sorić, Petar

Year: 2017   Volume: 67   Issue: 3   Pages: 221-249

Abstract: Apart from phenomenon of the “euro-induced price perception gap” in the euro area in 2002, the impact of media reporting on inflation tendencies is underexplored in the literature. Therefore, this paper tries to examine the influence of media content on the accuracy of consumers’ inflation perceptions and expectations in Croatia during the period 2007–2014. The authors obtain a unique database of articles from the archives of three leading Croatian news websites. The authors find that the content and tone of inflation-related articles significantly influence consumers’ ability to assess inflation accurately. The evidence is the most convincing in the aftermath of Croatian EU accession, when a considerable gap has emerged between consumers’ inflation sentiment and the official inflation rates. This is strikingly similar to the “euro-induced price perception gap” in 2002.

JEL classification: C32; E31

Keywords: inflation expectations, consumer surveys, state-space model, time-varying parameters, news media

RePEc: https://ideas.repec.org/a/fau/fauart/v67y2017i3p221-249.html

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