Work in Progress
Waves of Optimism and Pessimism: Evidence from German Firms
(with Zeno Enders)
Fiscal Narratives and Inflation Dynamics: A Heterogeneous Agent New Keynesian Model Approach
Working Papers
Abstract:
I explore the extend to which the inflation signals emitted by different types of newspapers can explain household’s inflation expectations in Germany. Constructing newspaper-specific indicators using the articles‘ text data and the large language model gpt-3.5-turbo-1106, I can find heterogeneity in the informativeness regarding the expectations of different socioeconomic groups, depending on the genre of the newspaper (i.e., tabloid vs. reputable newspapers). The tabloid’s inflation expectation indicator performs better in predicting expectations of low income and lower education households, while the contrary holds true for the more serious newspapers. I then employ local projections to estimate the newspaper indices‘ responses to a monetary policy shock. This again reveals heterogeneity with the tabloid’s sentiment displaying an immediate decrease while other newspaper’s responses are smaller and lagged.
Abstract:
We show that the impact of supply and monetary policy shocks on consumer prices is state-dependent. First, we let the data determine two inflation regimes and find that they are characterized by high and low inflation volatility. We then identify upstream supply shocks using instrumental variables based on data outliers in the producer price series. Such shocks exhibit a more substantial and more persistent effect on downstream prices during periods of elevated inflation volatility (State 2) compared to phases of more stable consumer price growth (State 1). Similarly, monetary policy shocks are more effective in State 2. Exogenously differentiating regimes by the level of inflation or the shock size does not reveal state dependency. The evidence supports a model in which producers invest in price flexibility. This model predicts that stricter inflation targeting reduces price flexibility and, consequently, the pass-through of all shocks to inflation, beyond the standard channel that affects demand.
Publications
Innovation types in public sector organizations: a systematic review of the literature. with Laurin Buchheim and Alexnder Krieger, Management Review Quarterly (2020), 70, 509-533.