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The Speed of Firm Response to Inflation

Author

Listed:
  • Ivan Yotzov
  • Nicholas Bloom
  • Philip Bunn
  • Paul Mizen
  • Gregory Thwaites

Abstract

This paper analyses the response of UK firms to monthly CPI inflation releases using high-frequency data from a large business survey. Firms’ inflation perceptions and expectations respond within hours of new inflation data releases. Firm expectations are most responsive when inflation coverage in the media is elevated, suggesting a key role for the media in focusing attention on data releases. Furthermore, firms respond to changes in inflation data, but not to surprises relative to professional forecasts. This highlights a distinction between “Wall Street”, where financial markets respond to inflation surprises, and “Main Street”, where firms respond to media inflation headlines.

Suggested Citation

  • Ivan Yotzov & Nicholas Bloom & Philip Bunn & Paul Mizen & Gregory Thwaites, 2024. "The Speed of Firm Response to Inflation," NBER Working Papers 32731, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:32731
    Note: ME
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    Cited by:

    1. De Santis, Roberto A. & Tornese, Tommaso, 2025. "Energy supply shocks’ nonlinearities on output and prices," European Economic Review, Elsevier, vol. 176(C).
    2. Lukas Hack & Davud Rostam-Afschar, 2024. "Understanding Firm Dynamics with Daily Data," CRC TR 224 Discussion Paper Series crctr224_2024_593, University of Bonn and University of Mannheim, Germany.

    More about this item

    JEL classification:

    • C83 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Survey Methods; Sampling Methods
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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