Abstract
Based on a framework of memory and recall that accounts for social networks, we provide conditions under which social networks can amplify expectations. We provide evidence for several predictions of the model using a novel dataset on inflation expectations and social network connections: Inflation expectations in the social network are statistically significantly, positively associated with individual inflation expectations; the relationship is stronger for groups that share common demographic characteristics, such as gender, income or political affiliation; an instrumental variables approach further establishes causality of these results. Our estimates imply that the influence of the social network overall amplifies but does not destabilize beliefs.
Includes bibliographical references (pages 37-39).