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What’s behind firms’ inflation forecasts?

Cristina Conflitti () and Roberta Zizza ()
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Cristina Conflitti: Banca d’Italia

Empirical Economics, 2021, vol. 61, issue 5, No 5, 2449-2475

Abstract: Abstract On what do firms base their expectations about future inflation? We investigate this by exploiting the Survey of Inflation and Growth Expectations carried out by Banca d’Italia and Il Sole 24 Ore on a sample of Italian firms. Several sources of information contribute to shaping short- and long-term expectations, such as media reports, professional forecasts, personal shopping experience, the inflation experienced when dealing with suppliers and the contract collective bargaining agreements. We find that firms’ inflation expectations are significantly affected by wage increases; being treated with the information on past inflation also plays a part. By estimating a price pass-through of wages at the firm level, we also argue that the process of prices’ adjustment following a contract renewal matters for shaping the view of entrepreneurs on consumer prices at the macro-level.

Keywords: Inflation expectations; Survey data; Wages; Information rigidity; Price pass-through (search for similar items in EconPapers)
JEL-codes: C23 E24 E31 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1007/s00181-020-01958-5

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