Inflation Expectations and Misallocation of Resources: Evidence from Italy

Tiziano Ropele, Yuriy Gorodnichenko and Olivier Coibion

No 16106, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Using Italian data that includes 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 expectations-induced misallocation is moderate, but we argue that it likely becomes 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)
Pages: 30 pages
Date: 2023-05
New Economics Papers: this item is included in nep-eec and nep-mon
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Published - published in: American Economic Review: Insights, 2024, 6 (2), 246–261

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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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