A Century Of Inflation Narratives

Abstract: We study the evolution of U.S. inflation narratives in American newspapers since 1923. An inflation narrative is an explanation of the causes and/or effects of inflation. Using natural language processing to analyze 4.2 million sentences, we document significant shifts in narrative prevalence across economic eras. We find sharp regional differences as well, with Northern papers emphasizing fiscal causes while Southern papers focusing on supply factors and interest rate effects. We also examine narrative diffusion, finding evidence that newspapers engage in narrative differentiation from local competitors while simultaneously experiencing contagion effects from more distance sources, implying complex dynamics of narrative propagation through the media landscape. Narrative framing also predicts heterogeneity in both short- and long-term consumer inflation expectations across income and education groups, with lower-income households showing greater sensitivity to narratives about the social/political consequences and cost-of-living effects of inflation. These narrative effects in some cases exceed the predictive power of realized inflation itself, suggesting exposure to different media framing may contribute to persistent gaps in inflation expectations across households.

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