Working Paper: CEPR ID: DP18243
Authors: Ezequiel Garcia-Lembergman; Ina Hajdini; John Leer; Mathieu Pedemonte; Raphael Schoenle
Abstract: Based on a framework of memory and recall that accounts for social networks, we provide conditions under which social networks can amplify expectations. We provide evidence for several predictions of the model using a novel dataset on inflation expectations and social network connections:Inflation expectations in the social network are statistically significantly, positively associated with individual inflation expectations; the relationship is stronger for groups that share common demographic characteristics, such as gender, income or political affiliation. An instrumental variable approach further establishes causality of these results, while also showing that salient information transmits strongly through the network. Our estimates imply that the influence of the social network overall amplifies but does not destabilize inflation expectations.
Keywords: memory; recall; inflation expectations; social network
JEL Codes: E31; E71
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| social network inflation expectations (D85) | individual inflation expectations (E31) |
| gas prices (L90) | social network inflation expectations (D85) |