Firm Inflation Uncertainty
AbstractWe introduce a new measure of own-price inflation uncertainty using firm-level data from a large and representative survey of UK businesses. Inflation uncertainty has increased significantly since the start of 2021, even as a similar measure of sales uncertainty has declined. We also find large cross-sectional differences in inflation uncertainty, with uncertainty particularly elevated for smaller firms and those in the goods sector. Finally, we show that firms that are more uncertain about their own price expectations experience higher forecast errors 12 months later. These findings suggest that inflation uncertainty may be important for understanding firm performance.
CitationYotzov, Ivan, Lena Anayi, Nicholas Bloom, Philip Bunn, Paul Mizen, Özgen Öztürk, and Gregory Thwaites. 2023. "Firm Inflation Uncertainty." AEA Papers and Proceedings, 113: 56-60. DOI: 10.1257/pandp.20231035
- D22 Firm Behavior: Empirical Analysis
- D81 Criteria for Decision-Making under Risk and Uncertainty
- D84 Expectations; Speculations
- E31 Price Level; Inflation; Deflation
- E37 Prices, Business Fluctuations, and Cycles: Forecasting and Simulation: Models and Applications