Firm Inflation Expectations and the Macroeconomy: Evidence from Thailand

Pym Manopimoke, Nuwat Nookhwun, Tanaporn Sriklay and Tanisa Tawichsri

No 265, PIER Discussion Papers from Puey Ungphakorn Institute for Economic Research

Abstract: In an open emerging market economy, firm inflation expectations are not simply noisy survey responses; instead, they are a state-dependent transmission channel through which global shocks affect firm behavior. Using monthly firm-level survey data from Thailand between 2012 and 2023, we show that short-term expected inflation—though biased and highly dispersed— responds systematically to macroeconomic conditions, particularly global inflation and oil prices. This response is state dependent, with firms exhibiting more attention during periods of higher inflation and stronger economic growth. Moreover, salient global shocks such as negative oil supply news shocks can lead to persistent and upward revisions in inflation expectations, particularly when inflation is high, while domestic shocks such as the minimum wage hike in Thailand during 2012–2013 only had modest and short-lived effects. Finally, using oil supply news shocks as an instrument, we find strong evidence of state-dependence for the influence of firms’ inflation expectations on business decisions. Price-setting and employment decisions are only significant in higher inflation episodes, while higher expected inflation drags firms’ investment, particularly during periods of lower growth.

Keywords: Firm inflation expectations; Emerging markets; Oil shocks; Minimum wage; Price-setting; Investment; Employment; State-dependence (search for similar items in EconPapers)
JEL-codes: D84 E31 O11 (search for similar items in EconPapers)
Pages: 46 pages
Date: 2026-10
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