No Firm Is an Island? How Industry Conditions Shape Firms’ Expectations

Philippe Andrade, Olivier Coibion, Erwan Gautier and Yuriy Gorodnichenko

No 20-17, Working Papers from Federal Reserve Bank of Boston

Abstract: We study how firms’ expectations and actions are affected by both aggregate and industry-specific conditions using a survey of French manufacturing firms. We document an important new stylized fact. In response to industry-level shocks that have no aggregate effects, firms’ aggregate expectations respond persistently. This is consistent with “island” models in which firms use the local prices they observe to make inferences about broader aggregate conditions. We then assess the extent to which these patterns are related to observable characteristics of firms and the industries in which they reside. Finally, we extend the analysis to firms’ expectations of their own future price changes and document how these respond to both industry and aggregate variation.

Keywords: expectations; rational inattention (search for similar items in EconPapers)
JEL-codes: E2 E3 E4 (search for similar items in EconPapers)
Pages: 49
Date: 2020-08-01
New Economics Papers: this item is included in nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
https://www.bostonfed.org/publications/research-de ... ms-expectations.aspx Summary (text/html)
https://www.bostonfed.org/-/media/Documents/Workingpapers/PDF/2020/wp2017.pdf Full text (application/pdf)

Related works:
Journal Article: No firm is an island? How industry conditions shape firms’ expectations (2022)
Working Paper: No firm is an island? How industry conditions shape firms’ expectations (2022)
Working Paper: No Firm Is an Island? How Industry Conditions Shape Firms Expectations (2020)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedbwp:89290

Ordering information: This working paper can be ordered from

DOI: 10.29412/bosfrb.wp.2020.17

Access Statistics for this paper

More papers in Working Papers from Federal Reserve Bank of Boston Contact information at EDIRC.
Bibliographic data for series maintained by Catherine Spozio ().