Firms expectations and the ELB
Coibion and al. use survey data of Italian firms to analyze how inflation expectations affect firms’ economic decisions:
We find that firms with higher inflation expectations during the ELB raise their prices more, hire more workers, utilize their credit lines more, and plan to do more investment than firms with higher inflation expectations outside the ELB, likely due to the fact that the former expect higher demand for their goods.
Inflation Expectations and Firms’ Decisions: New Causal Evidence
Authors: Olivier Coibion, Yuriy Gorodnichenko, Tiziano Ropele,
From: University of Texas-Austin, University of California-Berkeley, Bank of Italy
Firms’ expectations in high inflation countries
Frache and Lluberas use data of firms in Uruguay and find that information rigidities together with large inflation shocks might prompt firms to have a negative bias in forecast errors.
We then exploit peculiarities of the collective wage bargaining negotiation mechanism to estimate the impact of acquiring information about past inflation on expected future inflation. Our results imply that firms that adjust wages expect lower inflation, revise their expectations downwards and make smaller forecast errors than firms that do not adjust wages.
New Information and Inflation Expectations among Firms
Authors: Serafin Frache, Rodrigo Lluberas
From:University of Montevideo, Central Bank of Uruguay
