Firms’ Inflation and Wage Expectations during the Inflation Surge

Erwan Gautier, Frédérique Savignac and Olivier Coibion

Working papers from Banque de France

Abstract: Using a new survey of French firms’ inflation expectations that predates the inflation spike, we document i) evidence on the anchoring of inflation expectations during the inflation surge, and ii) the relevance of inflation expectations for firms’ decisions. First, we show that inflation expectations under-responded to the initial surge but then persistently overshot actual inflation dynamics. As inflation rose, firms initially perceived inflation to be less persistent than in previous years, an effect that dissipated over time. Second, we find that inflation expectations correlate with firms’ wage and price decisions. One-year expectations matter more than long-term expectations. During the inflation surge, wage and price decisions became increasingly disconnected from inflation expectations. This suggests that the scope for wage-price spirals is likely more limited than one might have expected from the surge in inflation and inflation expectations.

Keywords: Lifetime Earnings; Inequality; Gender Earnings Gaps (search for similar items in EconPapers)
JEL-codes: E2 E3 E4 (search for similar items in EconPapers)
Pages: 66 pages
Date: 2025
New Economics Papers: this item is included in nep-eur and nep-mon
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.banque-france.fr/system/files/2025-06/WP995_0.pdf

Related works:
Working Paper: Firms' Inflation and Wage Expectations during the Inflation Surge (2025)
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:bfr:banfra:995

Access Statistics for this paper

More papers in Working papers from Banque de France Banque de France 31 Rue Croix des Petits Champs LABOLOG - 49-1404 75049 PARIS. Contact information at EDIRC.
Bibliographic data for series maintained by Michael brassart ().