TY  - RPRT
        AU  - Coibion, Olivier
AU  - Gorodnichenko, Yuriy
AU  - Ropele, Tiziano
        TI  - Inflation Expectations and Firm Decisions: New Causal Evidence
        PY  - 2018/Dec/
        PB  - Institute of Labor Economics (IZA)
        CY  - Bonn
        T2  - IZA Discussion Paper
        IS  - 12037
        UR  - https://www.iza.org/publications/dp12037
        AB  - 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 European Central Bank'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, increase their utilization of credit, and reduce their employment. However, when policy rates are constrained by the effective lower bound, demand effects are stronger, leading firms to raise their prices more and no longer reduce their employment.
        KW  - inflation expectations
KW  - surveys
KW  - inattention
        ER  -