The Asymmetric and Heterogeneous Pass-through of Input Prices to Firms’ Expectations and Decisions

Fiorella De Fiore, Marco Lombardi and Giacomo Mangiante

No 20835, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: This paper studies the pass-through of input price shocks to firms’ expectations and pricing decisions using firm-level data from the Bank of Italy’s Survey on Inflation and Growth Expectations. We find a strong and asymmetric pass-through: positive input price shocks significantly raise firms’ price expectations, realised output prices and short-term inflation expectations, while negative shocks have little impact. The pass-through varies systematically with firm characteristics: it is higher for upstream firms and for firms facing greater uncertainty, adjusting prices more frequently, or operating with thinner profit margins. Macroeconomic conditions also matter: firms’ expectations respond more strongly to business-specific signals in periods of low inflation and to aggregate signals in periods of high inflation. Finally, we show that providing firms with information about current inflation dampens the pass-through to inflation expectations, underscoring the importance of central bank communication.

Keywords: Pass-through; Survey data; Inflation; Firm expectations (search for similar items in EconPapers)
JEL-codes: D22 D84 E31 E50 (search for similar items in EconPapers)
Date: 2025-11
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