Research on Monday Rotterdam

Olivier Coibion (University of Texas at Austin, United States)
Monday, 28 May 2018


We use a unique design feature of a survey of Italian firms to study the causal effect of inflation expectations on firms’ economic decisions. In the survey, a randomly chosen subset of firms is repeatedly treated with information about recent inflation (or the ECB’s inflation target) whereas other firms are not. This information treatment generates exogenous variation in inflation expectations. We find that higher inflation expectations on the part of firms leads them to raise their prices and reduce their employment.