Perceived and Expected Rates of Inflation of US Firms
AbstractThe seminal work of Jonung (1981) showed that households' perceptions of inflation are the strongest predictor of households' inflation expectations. This fact has been a key ingredient for testing and developing theoretical models of how economic agents form expectations (e.g., the famous Lucas (1972) island model). However, little is known about whether perceptions play a similar role for firms. Using a new survey of American CEOs, we document that inflation perceptions shape the inflation expectations of firms just as Jonung (1981) found for households. These results suggest that information rigidities apply not only for households but also for CEOs.
CitationCandia, Bernardo ⓡ Michael Weber ⓡ Yuriy Gorodnichenko ⓡ Olivier Coibion. 2023. "Perceived and Expected Rates of Inflation of US Firms." AEA Papers and Proceedings, 113: 52-55. DOI: 10.1257/pandp.20231034
- D22 Firm Behavior: Empirical Analysis
- D84 Expectations; Speculations
- E31 Price Level; Inflation; Deflation