Inflation Expectations and Misallocation of Resources: Evidence from Italy

Tiziano Ropele, Yuriy Gorodnichenko and Olivier Coibion

No 31190, NBER Working Papers from National Bureau of Economic Research, Inc

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 low, but we argue that it likely becomes quite significant in times of high inflation.

JEL-codes: E3 E5 E7 (search for similar items in EconPapers)
Date: 2023-04
New Economics Papers: this item is included in nep-des, nep-eec, nep-mac and nep-mon
Note: EFG ME
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Published as Tiziano Ropele & Yuriy Gorodnichenko & Olivier Coibion, 2024. "Inflation Expectations and Misallocation of Resources: Evidence from Italy," American Economic Review: Insights, vol 6(2), pages 246-261.

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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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