Inflation Narratives

Résumé

We provide evidence on the stories that people tell to explain a historically notable rise in inflation with a representative sample of the U.S. population, U.S. managers, and experts. We document substantial heterogeneity in narratives about the drivers of higher inflation rates. Experts put more emphasis on demand-side factors, including fiscal and monetary policy, while narratives related to supply-side issues such as labor shortages are similarly prevalent across groups. Laypeople are more likely to tell less specific accounts related to the pandemic or mis-management by the government. Households and managers expect the increase in inflation to be more persistent compared to experts. Moreover, the narratives about the drivers of the inflation increase are strongly associated with beliefs about the persistence of higher inflation. We discuss the implications of our findings for understanding disagreement in macroeconomic expectations.