Inflation Expectations and Misallocation of Resources: Evidence from Italy

Tiziano Ropele, Yuriy Gorodnichenko and Olivier Coibion

American Economic Review: Insights, 2024, vol. 6, issue 2, 246-61

Abstract: Using Italian data that include both inflation forecasts of firms and external information on their balance sheets, we study the causal effect of changes in the dispersion of beliefs about future inflation on the misallocation of resources. We find that as disagreement increases, so does misallocation. In times of low inflation, the aggregate TFP loss of the dispersed expectation-induced misallocation is moderate, but we argue that it likely becomes quite significant in times of high inflation.

JEL-codes: D22 D83 D84 E31 E37 (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (5)

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Related works:
Working Paper: Inflation expectations and misallocation of resources: evidence from Italy (2023)
Working Paper: Inflation Expectations and Misallocation of Resources: Evidence from Italy (2023)
Working Paper: Inflation Expectations and Misallocation of Resources: Evidence from Italy (2023)
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DOI: 10.1257/aeri.20230201

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