The Macroeconomic Expectations of Firms

Bernardo Candia, Olivier Coibion and Yuriy Gorodnichenko

No 30042, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Using surveys of firms around the world, we review existing evidence on how firms form their macroeconomic expectations. Several facts stand out. First, the mean inflation forecasts of firms often deviate significantly from those of professional forecasters and households. Second, disagreement about inflation among firms is large. Third, firms often change their short-run and long-run inflation expectations jointly and by similar amounts. Fourth, firms in economies with a history of low and stable inflation are inattentive to inflation and monetary policy, but this is less true in countries with more volatile environments. Fifth, firms form expectations about inflation and the real economy jointly, but the way in which they do can differ widely across countries. Finally, we show that conditioning on firms’ inflation expectations generates a stable Phillips curve relationship. We also review evidence showing that exogenous variation in the macroeconomic expectations of firms affects their decisions.

JEL-codes: E03 E30 E40 E5 (search for similar items in EconPapers)
Date: 2022-05
New Economics Papers: this item is included in nep-cba, nep-eec, nep-mac, nep-mon and nep-opm
Note: EFG ME
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Citations: View citations in EconPapers (8)

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