Inflation expectations and misallocation of resources: evidence from Italy

Tiziano Ropele (), Yuriy Gorodnichenko and Olivier Coibion
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Tiziano Ropele: Bank of Italy

No 1437, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: Using Italian data that includes both firms' inflation forecasts 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 from the dispersed expectations-induced misallocation is moderate, but we argue that it is likely to become quite significant in times of high inflation.

Keywords: misallocation; inflation expectations (search for similar items in EconPapers)
JEL-codes: C83 D84 E31 O47 (search for similar items in EconPapers)
Date: 2023-12
New Economics Papers: this item is included in nep-eec and nep-mon
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Related works:
Journal Article: Inflation Expectations and Misallocation of Resources: Evidence from Italy (2024)
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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Persistent link: https://EconPapers.repec.org/RePEc:bdi:wptemi:td_1437_23

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