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The term structure of firms' inflation expectations

Author

Listed:
  • Miguel Mello

    (Banco Central del Uruguay)

  • Jorge Ponce

    (Banco Central del Uruguay
    dECON-FCS-Udelar)

  • Juan Pablo Medina

    (Universidad Adolfo Ibañez)

Abstract

The share of firms that differentiate their inflation expectations between one-year and two-year horizons is a relevant statistic for changes in inflation expectations. Furthermore, firms that obtain information from the central bank are more likely to distinguish between horizons and forecast convergence of inflation expectations toward the inflation target. Decision-makers tend not to differentiate between horizons, but when they do, they are more likely to predict convergence. External advisors tend to differentiate between horizons and are more likely to predict divergence. The results highlight the importance of analyzing inflation expectations formation by firms for understanding inflation dynamics and conducting effective monetary policy.

Suggested Citation

  • Miguel Mello & Jorge Ponce & Juan Pablo Medina, 2023. "The term structure of firms' inflation expectations," Documentos de trabajo 2023004, Banco Central del Uruguay.
    • Handle: RePEc:bku:doctra:2023004
    as

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    File URL: https://www.bcu.gub.uy/Estadisticas-e-Indicadores/Documentos%20de%20Trabajo/4.2023.pdf
    File Function: First version, 2023
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    More about this item

    Keywords

    Inflation expectations; Inflation dynamics; Monetary Policy;
    All these keywords.

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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