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New Facts about Firms' Inflation Expectations: Simple Tests for a Sticky Information Model

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Listed:
  • Yosuke Uno

    (Bank of Japan)

  • Saori Naganuma

    (Bank of Japan)

  • Naoko Hara

    (Bank of Japan)

Abstract

In this paper, we use a large dataset based on firm-level micro-data from the Tankan survey to examine firms' inflation expectations. We first present two basic findings: (i) firms' inflation expectations are downwardly rigid at zero, and (ii) differences in firms' inflation expectations are larger across firm sizes than across sectors. We then report three findings which are in line with predictions of the simple sticky information model proposed by Mankiw and Reis (2002). First, in each period, a number of firms do not revise their expectations. Second, the frequency of forecast revisions is constant over time. Third, our estimates of the frequency of forecast revisions based on the Tankan survey are much smaller than those in previous studies and are much closer to the value that Mankiw and Reis (2002) assumed in their simulation exercises.

Suggested Citation

  • Yosuke Uno & Saori Naganuma & Naoko Hara, 2018. "New Facts about Firms' Inflation Expectations: Simple Tests for a Sticky Information Model," Bank of Japan Working Paper Series 18-E-14, Bank of Japan.
    • Handle: RePEc:boj:bojwps:wp18e14
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    References listed on IDEAS

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    Cited by:

    1. Shuichiro Ikeda & Haruhiko Inatsugu & Yui Kishaba & Takuji Kondo & Kenichi Sakura & Kosuke Takatomi & Takashi Nakazawa & Kotone Yamada, "undated". "Inflation in Japan: Changes during the Pandemic and Issues for the Future," Bank of Japan Working Paper Series 22-E-18, Bank of Japan.
    2. Haruhiko Inatsugu & Tomiyuki Kitamura & Taichi Matsuda, 2019. "The Formation of Firms' Inflation Expectations: A Survey Data Analysis," Bank of Japan Working Paper Series 19-E-15, Bank of Japan.
    3. Yosuke Uno & Saori Naganuma & Naoko Hara, 2018. "New Facts about Firms' Inflation Expectations: Short- versus Long-Term Inflation Expectations," Bank of Japan Working Paper Series 18-E-15, Bank of Japan.
    4. Jouchi Nakajima & Hiroaki Yamagata & Tatsushi Okuda & Shinnosuke Katsuki & Takeshi Shinohara, 2021. "Extracting Firms' Short-Term Inflation Expectations from the Economy Watchers Survey Using Text Analysis," Bank of Japan Working Paper Series 21-E-12, Bank of Japan.

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    More about this item

    Keywords

    inflation expectations; frequency of forecast revisions; sticky information model;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications

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