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Narratives about the macroeconomy

  • We provide evidence on narratives about the macroeconomy - the stories people tell to explain macroeconomic phenomena - in the context of a historic surge in inflation. In surveys with more than 10,000 US households and 100 academic experts, we measure economic narratives in open-ended survey responses and represent them as Directed Acyclic Graphs. Households' narratives are strongly heterogeneous, coarser than experts' narratives, focus more on the supply side than on the demand side, and often feature politically loaded explanations. Households' narratives matter for their inflation expectation formation, which we demonstrate with descriptive survey data and a series of experiments. Informed by these findings, we incorporate narratives into an otherwise conventional New Keynesian model and demonstrate their importance for aggregate outcomes.

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Author:Peter AndreORCiDGND, Ingar HaalandORCiD, Christopher RothORCiDGND, Mirko WiederholtGND, Johannes WohlfartORCiDGND
URN:urn:nbn:de:hebis:30:3-715908
URL:https://ssrn.com/abstract=4947636
DOI:https://doi.org/10.2139/ssrn.4947636
Series (Serial Number):SAFE working paper (426)
Publisher:SAFE
Place of publication:Frankfurt am Main
Document Type:Working Paper
Language:English
Year of Completion:2024
Year of first Publication:2024
Publishing Institution:Universitätsbibliothek Johann Christian Senckenberg
Release Date:2024/09/17
Tag:Causal Reasoning; Expectation Formation; Inflation; Narratives
Edition:September 1, 2024
Page Number:126
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Funding: Danish National Research Foundation ; DNRF134
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Funding: DFG ;  CRC TR 224
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Funding: Norwegian Centre of Excellence Scheme ; FAIR project No 262675
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Funding: SAFE
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Funding: DFG ; EXC 2126/1-390838866
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JEL-Klassifikation
E Macroeconomics and Monetary Economics / E7 Macro-Based Behavioral / Economics E71 Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on the Macro Economy
Institutes:Wirtschaftswissenschaften / Wirtschaftswissenschaften
Wissenschaftliche Zentren und koordinierte Programme / House of Finance (HoF)
Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS)
Wissenschaftliche Zentren und koordinierte Programme / Sustainable Architecture for Finance in Europe (SAFE)
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
JEL-Classification:D Microeconomics / D8 Information, Knowledge, and Uncertainty / D83 Search; Learning; Information and Knowledge; Communication; Belief
D Microeconomics / D8 Information, Knowledge, and Uncertainty / D84 Expectations; Speculations
E Macroeconomics and Monetary Economics / E3 Prices, Business Fluctuations, and Cycles / E31 Price Level; Inflation; Deflation
E Macroeconomics and Monetary Economics / E3 Prices, Business Fluctuations, and Cycles / E32 Business Fluctuations; Cycles
Sammlungen:Universitätspublikationen
Licence (German):License LogoDeutsches Urheberrecht

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