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The Inflation Expectations of U.S. Firms: Evidence from a new survey

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  • Bernardo Candia
  • Olivier Coibion
  • Yuriy Gorodnichenko

Abstract

Introducing a new survey of U.S. firms’ inflation expectations, we document key stylized facts involving what U.S. firms know and expect about inflation and monetary policy. The resulting time series of firms’ inflation expectations displays unique dynamics, distinct from those of households and professional forecasters. By any typical definition of “anchored” expectations, the inflation expectations of U.S. managers appear far from anchored, much like those of households. And like households, U.S. managers are largely uninformed about recent aggregate inflation dynamics or monetary policy. These results complement existing evidence on firms’ inflation expectations from other countries and confirm that inattention to inflation and monetary policy is pervasive among U.S. firms as well.

Suggested Citation

  • Bernardo Candia & Olivier Coibion & Yuriy Gorodnichenko, 2021. "The Inflation Expectations of U.S. Firms: Evidence from a new survey," NBER Working Papers 28836, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:28836
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    Cited by:

    1. Alan S. Blinder & Michael Ehrmann & Jakob de Haan & David-Jan Jansen, 2022. "Central Bank Communication with the General Public: Promise or False Hope?," Working Papers 291, Princeton University, Department of Economics, Center for Economic Policy Studies..
    2. Yuriy Gorodnichenko & Dmitriy Sergeyev, 2021. "Zero Lower Bound on Inflation Expectations," NBER Working Papers 29496, National Bureau of Economic Research, Inc.
    3. Kurozumi, Takushi & Van Zandweghe, Willem, 2022. "Macroeconomic changes with declining trend inflation: Complementarity with the superstar firm hypothesis," European Economic Review, Elsevier, vol. 141(C).
    4. Michael Weber & Francesco D'Acunto & Yuriy Gorodnichenko & Olivier Coibion, 2022. "The Subjective Inflation Expectations of Households and Firms: Measurement, Determinants, and Implications," Journal of Economic Perspectives, American Economic Association, vol. 36(3), pages 157-184, Summer.
    5. Link, Sebastian & Peichl, Andreas & Roth, Christopher & Wohlfart, Johannes, 2021. "Information Frictions among Firms and Households," CAGE Online Working Paper Series 556, Competitive Advantage in the Global Economy (CAGE).
    6. Hunziker, Hans-Ueli & Raggi, Christian & Rosenblatt-Wisch, Rina & Zanetti, Attilio, 2022. "The impact of guidance, short-term dynamics and individual characteristics on firms’ long-term inflation expectations," Journal of Macroeconomics, Elsevier, vol. 71(C).
    7. Zhao Han & Xiaohan Ma & Ruoyun Mao, 2023. "The Role of Dispersed Information in Inflation and Inflation Expectations," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 48, pages 72-106, April.
    8. Zeno Enders & Franziska Hünnekes & Gernot Müller, 2019. "Firm expectations and economic activity," CESifo Working Paper Series 7623, CESifo.
    9. Reis, Ricardo, 2021. "Losing the inflation anchor," CEPR Discussion Papers 16664, C.E.P.R. Discussion Papers.
    10. Julien Pinter & Evzen Kocenda, 2021. "Media Treatment of Monetary Policy Surprises and Their Impact on Firms' and Consumers' Expectations," Working Papers IES 2021/30, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Sep 2021.
    11. Cornand, Camille & Hubert, Paul, 2022. "Information frictions across various types of inflation expectations," European Economic Review, Elsevier, vol. 146(C).
    12. Ray C. Fair, 2021. "What do price equations say about future inflation?," Business Economics, Palgrave Macmillan;National Association for Business Economics, vol. 56(3), pages 118-128, July.
    13. Jeffrey Schafer, 2022. "Inflation Expectations and Their Formation: Working Paper 2022-03," Working Papers 57398, Congressional Budget Office.
    14. Wenting Song & Samuel Stern, 2022. "Firm Inattention and the Efficacy of Monetary Policy: A Text-Based Approach," Staff Working Papers 22-3, Bank of Canada.
    15. Jonas Dovern & Lena Sophia Müller & Klaus Wohlrabe, 2022. "Local Information and Firm Expectations about Aggregates," CESifo Working Paper Series 9826, CESifo.
    16. Chris Campos & Micheal McMain & Mathieu Pedemonte, 2022. "Understanding Which Prices Affect Inflation Expectations," Economic Commentary, Federal Reserve Bank of Cleveland, vol. 2022(06), pages 1-7, April.
    17. Ray C. Fair, 2021. "What Do Price Equations Say About Future Inflation?," Cowles Foundation Discussion Papers 2287, Cowles Foundation for Research in Economics, Yale University.
    18. Bouche Paul, & Gerardin Mathilde, & Gautier Erwan, Savignac Frédérique & Savignac Frédérique., 2021. "Measuring firms’ inflation expectations [Mesurer les anticipations d’inflation des entreprises]," Bulletin de la Banque de France, Banque de France, issue 236.
    19. Gautier, Erwan & Roux, Sébastien & Suarez Castillo, Milena, 2022. "How do wage setting institutions affect wage rigidity? Evidence from French micro data," Labour Economics, Elsevier, vol. 78(C).

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    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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