Using a large news corpus and machine learning algorithms we investigate the role played by the media in the expectations formation process of households, and conclude that the news topics media report on are good predictors of both inflation and inflation expectations. In turn, in a noisy information model, augmented with a simple media channel, we document that the time series features of relevant topics help explain time-varying information rigidity among households. As such, we provide a novel estimate of state-dependent information rigidities and present new evidence highlighting the role of the media in understanding inflation expectations and information rigidities. (C) 2020 The Authors. Published by Elsevier B.V.

Using a large news corpus and machine learning algorithms we investigate the role played by the media in the expectations formation process of households, and conclude that the news topics media report on are good predictors of both inflation and inflation expectations. In turn, in a noisy information model, augmented with a simple media channel, we document that the time series features of relevant topics help explain the time-varying information rigidity among households. As such, we provide a novel estimate of state dependent information rigidities, and present new evidence highlighting media’s role for understanding inflation expectations and information rigidities. JEL-codes: C11, C53, D83, D84, E13, E31, E37

We analyze if the transmission of oil price shocks on the U.S. economy has changed with the shale oil boom. To do so, we put forward a framework that allows for spillovers between industries and learning by doing (LBD) over time. We identify these spillovers using a time-varying parameter factor-augmented vector autoregressive (VAR) model with both state level and country level data. In contrast to previous results, we find considerable changes in the way oil price shocks are transmitted to the U.S economy: there are now positive spillovers to non-oil investment, employment and production from an increase in the oil price effects that were not present before the shale oil boom.

PRELIMINARY VERSION We analyse if the transmission of oil price shocks on the U.S. economy has changed with the U.S. shale oil boom. To do so we allow for spillovers between industries and employment at both the country and the state level. We identify and quantify these spillovers using a factor-augmented vector autoregressive (VAR) model, allowing for time-varying changes in the parameters and the structural shocks. We find considerable changes in the way oil price shocks are transmitted to the U.S. economy since the shale oil boom. In particular, we find increasingly positive spillovers to investment, production and employment in both oil producing and non-oil producing states from an increase in the oil price; effects that were not present before the boom. (JEL C11, E32, E42 Q43)