News Consumption, Political Preferences, and Accurate Views on Inflation

Abstract

Using three waves of a customised survey among Dutch households, this paper studies the variation in people’s views on inflation. Based on a range of panel regressions, we find that accurate perceptions of recent price changes are an important determinant of the accuracy of next-year inflation expectations. The realism of inflation perceptions is, in turn, related to the intensity of newspaper consumption and also affected by the broadness of a person’s political preferences. However, more frequent newspaper usage does not necessarily reduce errors in inflation perceptions.

Keywords: inflation expectations, inflation perceptions, newspaper readership, political preferences, household survey data

JEL Classification: D12, D83, D84, E31, E58