News, Sentiment, and Inflation Expectations: Insights From Social Media Data and Experiment (Job Market Paper)
SSRN Link
News media serve as a primary information source for most people, with social media taking on a growing role in the way news is distributed and interacted. This paper investigates how households use information conveyed through media to form their inflation forecasts. Leveraging microdata, social media news data, and machine learning techniques, I show that households dynamically update the news topics they focus on when forming inflation expectations. However, the impact of news media on expectations is time varying — at times, it accounts for a significant portion of the variation in expectations, while at other times, its influence diminishes. Using social media reactions as a proxy for news-induced sentiment, I show that sentiment plays a central role in shaping expectations and can predict the direction of forecast revisions, even when the news is non-economic and unlikely to affect inflation through standard mechanisms. A novel information provision experiment, incorporating a sentiment elicitation method, further confirms the causal importance of sentiment in the expectations formation process. Moreover, I demonstrate that identical policy-related information, when framed with different tones, evokes distinct sentiment that lead to asymmetric effects on forecast revisions. I develop a simple Bayesian learning model in which sentiment distorts signal perception, explaining these results.
Presentations (includes scheduled): ASSA 2026, Indiana University Macroeconomic Seminar (2025), Midwest Macroeconomics Meeting (Spring 2025), Ostrom-Smith Conference in Behavioral and Experimental Economics (2023), Hoosier Economic Conference (2023), Department of Economics Macro Brownbag (2023)
Incentivizing Inflation Expectations with Daniela Puzzello, Ryan Rholes, Alena Wabitsch (Submitted)
SSRN Link
Accurate inflation expectations are central to economic modeling and policy. Yet major surveys elicit them without performance-based marginal incentives, despite their well-established importance to belief data quality in experimental economics. We show that marginal incentives raise effort and fundamentally reshape reported inflation expectations: lowering upward bias by 3.4 percentage points, reducing disagreement by one-third, closing the gender gap, and tripling learning rates in an RCT. Incentivized expectations are more consistent and better predict spending. Calibrating a simple New Keynesian model, we demonstrate that these differences matter: marginal incentives sharpen empirical inference and improve policy guidance -- without increasing participant remuneration.
Presentations (includes scheduled): Sixth Joint BoC – ECB – New York Fed Conference on Expectations Surveys (2025)*, BSE Summer Forum Workshop on Theoretical and Experimental Macroeconomics (2025)*, 3rd Paris Conference on the Macroeconomics of Expectations (2025)*, Ostrom-Smith Conference in Behavioral and Experimental Economics (2025)
* - presented by Co-Author
Forecasting the Future Through a Partisan Lens: Electoral Outcomes and Household Expectations with Nayeon Kang
(Draft available upon request)
Political partisanship shapes the economic expectations of U.S. households. To examine how electoral outcomes influence forecasts of inflation and unemployment, we conducted a two-wave survey, with the second wave on the morning of November 6, 2024, immediately after the presidential election. Democrats revised their expectations more pessimistically, raising projected inflation and unemployment. Republicans, despite largely anticipating a Trump victory, still revised forecasts more optimistically, often projecting deflation, which most respondents view as favorable. Forecast disagreement narrowed among Republicans but widened among Democrats. To support the empirics, we present an expectations-formation framework where perceived signals are influenced by political bias. We simulate respondent-like personas with a constrained LLM to assess external validity. It recovers the pre-election partisan gap and rapid updating but misses Republicans’ downward revision and dispersion.
A penny for your thoughts? Incentive design and inflation expectations elicitation with Daniela Puzzello, Ryan Rholes, Daniela Valdivia, Alena Wabitsch
Choosing Digital Currency Design with Daniela Puzzello
Misperception or Misconception? Dissonance in Households’ Inflation Forecasts with Nayeon Kang
