Divergent macro-economic developments within a currency area can lead to undesired distortions. That is why in the Eurozone much attention was drawn to the homogeneity of the currency area. However, at the beginning the Eurozone seemed to be too heterogeneous for a common currency. So many hopes...

Using a novel dataset that integrates inflation expectations with information on social network connections, we show that inflation expectations within one's social network have a positive, causal relationship with individual inflation expectations. This relationship is stronger for groups that...