Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/299943 
Year of Publication: 
2024
Series/Report no.: 
IZA Discussion Papers No. 17015
Publisher: 
Institute of Labor Economics (IZA), Bonn
Abstract: 
This paper provides new survey evidence on firms' inflation expectations in the euro area. Building on the ECB's Survey on the Access to Finance of Enterprises (SAFE), we introduce consistent measurement of inflation expectations across countries and shed new light on the properties and causal effects of these expectations. We find considerable heterogeneity in firms' inflation expectations and show that firms disagree about future inflation more than professional forecasters but less than households. We document that differences in firms' demographics, firms' choices and constraints, and cross-country macroeconomic environments account for most of the variation in inflation expectations by roughly equal shares. Using an RCT approach, we show that firms update their inflation expectations in a Bayesian manner. Moreover, they revise their plans regarding prices, wages, costs and employment in response to information treatments about current or future inflation.
Subjects: 
inflation expectations
firm decisions
price setting
surveys
randomised controlled trial
JEL: 
E20
E31
E52
Document Type: 
Working Paper

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