Investor attention and consumer price index inflation rate: Evidence from the United States

This paper investigates the relationship between investor attention and inflation in the United States. Using Google Search Volume Index (GSVI) as a proxy for investor attention and the Consumer Price Index (CPI) inflation rate, the study employs Granger causality tests, vector autoregression (VAR) models, and linear regression models. The findings reveal that investor attention is a Granger cause of inflation and has a negative impact on it. Predictive models incorporating investor attention significantly outperform benchmark models in forecasting inflation at both short and long horizons. Robustness checks confirm these results. The study further demonstrates that investor attention influences inflation through inflation expectations.

Panpan Zhu, Qingjie Zhou, Yinpeng Zhang