Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/279032 
Year of Publication: 
2023
Series/Report no.: 
IZA Discussion Papers No. 16334
Publisher: 
Institute of Labor Economics (IZA), Bonn
Abstract: 
This study analyzes how firms form their inflation expectations during a regime change in monetary policy and a transition to a low-inflation environment. Using the Bank of Israel survey of firms, we document the basic properties of firms' inflation expectations and examine how Israeli firms update their inflation expectations after receiving new information about inflation or monetary policy. We find that even after successful de-dollarization and disinflation a positive inflation surprise leads to a sizable upward adjustment in inflation expectations for the next year and quarter. A surprise hike in the monetary interest rate leads to a downward adjustment in inflation expectations.
Subjects: 
monetary policy
surveys
firms
inflation expectations
JEL: 
D22
E31
E52
Document Type: 
Working Paper

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