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Inflation expectations and price-setting decisions: insights from the housing market

Author

Listed:
  • Elisa Guglielminetti

    (Bank of Italy)

  • Michele Loberto

    (Bank of Italy)

Abstract

We investigate how inflation expectations affect pricing decisions in the housing market. We leverage a randomized control trial embedded within an Italian survey of real estate agents and combine survey data for each agent with high-frequency listing prices observed on a large digital platform. Exploiting an exogenous shift in inflation expectations generated by information treatment, we find that higher inflation expectations cause a one-to-one increase in housing listing prices, on average. The pass-through is weaker in more concentrated and low-demand markets, as well as for agents who are more pessimistic about housing and credit developments.

Suggested Citation

  • Elisa Guglielminetti & Michele Loberto, 2025. "Inflation expectations and price-setting decisions: insights from the housing market," Temi di discussione (Economic working papers) 1507, Bank of Italy, Economic Research and International Relations Area.
    • Handle: RePEc:bdi:wptemi:td_1507_25
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    File URL: https://www.bancaditalia.it/pubblicazioni/temi-discussione/2025/2025-1507/en_tema_1507.pdf
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    Keywords

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    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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