Epidemiology of Inflation Expectations and Internet Search- An Analysis for India

J, Saakshi and Sahu, Sohini and Chattopadhyay, Siddhartha (2019): Epidemiology of Inflation Expectations and Internet Search- An Analysis for India. Published in: Journal of Economic Interaction and Coordination No. https://doi.org/10.1007/s11403-019-00255 (4 July 2019): pp. 1-23.

Abstract

This paper investigates how inflation expectations of individuals are formed in India. We investigate if the news on inflation plays a role in the formation of inflation expectations following the epidemiology-based work by Carroll (2003). The standard literature on this topic considers news coverage by the print and audio-visual media as the sources of formation of inflation expectations. Instead, we consider the Internet as a potential common source of information based on which agents form their expectations about future inflation. Based on data extracted from Google Trends, our results indicate that during the period 2006 to 2018, the Internet has indeed been a common source of information based on which agents have formed their expectations about future inflation, and the Internet search sentiment has had some impact on inflation expectations. Additionally, based on the inflation expectations series derived from the Google Trends data, we find that there is presence of “information stickiness” in the system since only a small fraction of the population update their inflation expectations each period.

• Item Type: MPRA Paper
• Language: English
• Keywords: Inflation expectations, Epidemiology, Internet search, Google Trends, India.
• Subjects: 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 > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E58 - Central Banks and Their Policies

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