Firms’ expectations and price-setting: evidence from micro data

Lena Boneva, James Cloyne, Martin Weale () and Tomasz Wieladek

No 48, Discussion Papers from Monetary Policy Committee Unit, Bank of England

Abstract: In many forward-looking macroeconomic models, such as the New Keynesian model, firms’ expectations about the future play a key role in determining outcomes today. We examine this hypothesis using a novel panel dataset on firms actual and expected price changes collected by the Confederation of British Industry. Our microeconometric approach overcomes the identification issues faced by previous empirical studies. The results suggest that firms’ expectations play a key role in their price-setting behaviour, with a coefficient on firm’s expectations consistent with the discount factor typically assumed in macroeconomic models.

Keywords: Pricing-setting; survey data; inflation expectations; New Keynesian Phillips Curve (search for similar items in EconPapers)
JEL-codes: C23 C26 E31 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2016-08-11
New Economics Papers: this item is included in nep-mac and nep-mkt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
https://www.bankofengland.co.uk/-/media/boe/files/ ... F97CCED57C69BCCEBC1B Full text (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:mpc:wpaper:0048

Access Statistics for this paper

More papers in Discussion Papers from Monetary Policy Committee Unit, Bank of England Contact information at EDIRC.
Bibliographic data for series maintained by Bank of England Website ().