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Contracts and Firms' Inflation Expectations

Author

Listed:
  • Saten Kumar

    (Auckland University of Technology)

  • Dennis Wesselbaum

    (University of Otago)

Abstract

We use novel survey data to study firms’ inventory contracts. We document facts about the usage of purchase and sale contracts. We find that firms purchase and sell inventory through three contractual arrangements: fixed price and quantity, fixed price only, and fixed quantity only. Those using fixed price and quantity hold the largest share of contracts. The average duration of purchase contracts is not very different from the average duration of sale contracts. We then find that the upward bias in inflation expectations is a feature of firms that do not purchase or sell largely through contracts. Our findings are useful in the calibration of sticky price models.

Suggested Citation

  • Saten Kumar & Dennis Wesselbaum, 2024. "Contracts and Firms' Inflation Expectations," The Review of Economics and Statistics, MIT Press, vol. 106(1), pages 246-255, January.
    • Handle: RePEc:tpr:restat:v:106:y:2024:i:1:p:246-255
    DOI: 10.1162/rest_a_01115
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