Open Daily: 10am - 10pm | Alley door pickup 10am - 7pm 3038 Hennepin Ave Minneapolis, MN
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  • Open Daily: 10am - 10pm
    Alley-side Pickup: 10am - 7pm

    3038 Hennepin Ave Minneapolis, MN
    612-822-4611

Open Daily: 10am - 10pm | Alley-side Pickup: 10am - 7pm
3038 Hennepin Ave Minneapolis, MN
612-822-4611
Finance and Economics Discussion Series

Finance and Economics Discussion Series

United States Federal Reserve Board
Doms, Mark
Morin, Norman

Paperback

Business GeneralEconomicsInvesting & Finance

ISBN10: 1025148525
ISBN13: 9781025148526
Publisher: Hutson Street Press
Published: May 22 2025
Pages: 72
Weight: 0.25
Height: 0.15 Width: 6.14 Depth: 9.21
Language: English

The news media affects consumers' perceptions of the economy through three channels. First, the news media conveys the latest economic data and the opinions of professionals to consumers. Second, consumers receive a signal about the economy through the tone and volume of economic reporting. Last, the greater the volume of news about the economy, the greater the likelihood that consumers will update their expectations about the economy. We find evidence that all three of these channels affect consumer sentiment. We derive measures of the tone and volume of economic reporting, building upon the R-word index of The Economist. We find that there are periods when reporting on the economy has not been consistent with actual economic events, especially during the early 1990s. As a consequence, there are times during which consumer sentiment is driven away from what economic fundamentals would suggest. We also find evidence supporting that consumers update their expectations about the economy much more frequently during periods of high news coverage than in periods of low news coverage; high news coverage of the economy is concentrated during recessions and immediately after recessions, implying that stickiness in expectations is countercyclical. Finally, because the model of consumer sentiment is highly nonlinear, month-to-month changes in sentiment are difficult to interpret. For instance, although an increase in the number of articles that mention recession typically is associated with a decline in sentiment, under certain conditions it can actually result in an increase in various sentiment indexes.

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