Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/279285 
Year of Publication: 
2023
Series/Report no.: 
CESifo Working Paper No. 10535
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
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 10,000 US households and 100 academic experts and document three main findings. First, households' narratives are strongly heterogeneous and coarser than experts' narratives, focus more on the supply side than on the demand side, and often 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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