Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/258961 
Year of Publication: 
2021
Series/Report no.: 
CEBI Working Paper Series No. 18/21
Publisher: 
University of Copenhagen, Department of Economics, Center for Economic Behavior and Inequality (CEBI), Copenhagen
Abstract: 
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. We measure economic narratives in open-ended survey responses and represent them as Directed Acyclic Graphs. We apply this approach in surveys with more than 8,000 US households and 100 academic experts. We document three main findings. First, compared to experts, households' narratives are coarser, focus less on the demand side, and are more likely to feature politically-loaded explanations. Second, households' narratives strongly shape their inflation expectations, which we demonstrate with descriptive survey data and a series of experiments. Third, an experiment varying news consumption shows that the media is an important source of narratives. Our findings demonstrate the relevance of narratives for understanding macroeconomic expectation formation.
Subjects: 
Narratives
Expectation Formation
Causal Reasoning
Inflation
Media
Attention
JEL: 
D83
D84
E31
E52
E71
Document Type: 
Working Paper

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