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New Facts about Firms' Inflation Expectations: Simple Tests for a Sticky Information Model

Yosuke Uno, Saori Naganuma and Naoko Hara
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Yosuke Uno: Bank of Japan
Saori Naganuma: Bank of Japan
Naoko Hara: Bank of Japan

No 18-E-14, Bank of Japan Working Paper Series from Bank of Japan

Abstract: In this paper, we use a large dataset based on firm-level micro-data from the Tankan survey to examine firms' inflation expectations. We first present two basic findings: (i) firms' inflation expectations are downwardly rigid at zero, and (ii) differences in firms' inflation expectations are larger across firm sizes than across sectors. We then report three findings which are in line with predictions of the simple sticky information model proposed by Mankiw and Reis (2002). First, in each period, a number of firms do not revise their expectations. Second, the frequency of forecast revisions is constant over time. Third, our estimates of the frequency of forecast revisions based on the Tankan survey are much smaller than those in previous studies and are much closer to the value that Mankiw and Reis (2002) assumed in their simulation exercises.

Keywords: inflation expectations; frequency of forecast revisions; sticky information model (search for similar items in EconPapers)
JEL-codes: E31 E37 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac and nep-mon
Date: 2018-10-29
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