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News of disinflation and firms’ expectations: New causal evidence

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  • Caruso-Bloeck, Martin
  • Mello, Miguel
  • Ponce, Jorge

Abstract

We causally identify how firms’ inflation and growth expectations respond to information about a comprehensive reform in the monetary policy framework by means of a randomized control trial. The reform is intended to lower inflation significantly in the coming years, making this experiment unique relative to previous ones that are carried out in stable and consolidated monetary policy frameworks. Firms treated with information about the reform lower their inflation and cost expectations by about 0.5 percentage points, with the effect being persistent sixth months after the treatment. Treated firms also expect temporarily lower GDP growth.

Suggested Citation

  • Caruso-Bloeck, Martin & Mello, Miguel & Ponce, Jorge, 2023. "News of disinflation and firms’ expectations: New causal evidence," Journal of International Money and Finance, Elsevier, vol. 137(C).
    • Handle: RePEc:eee:jimfin:v:137:y:2023:i:c:s0261560623001158
    DOI: 10.1016/j.jimonfin.2023.102914
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    More about this item

    Keywords

    Inflation expectations; Economic expectations; Disinflation; Monetary policy communication; Randomized control trial; Firms’ survey;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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