Abstract
This paper uses survey data to gauge firms’ inflation uncertainty. First, it shows how commonly used proxies of uncertainty, such as ex post squared forecast errors or forecast dispersion differ from measures of actual ex ante inflation uncertainty. Second, this paper documents novel stylized facts: firms’ uncertainty and overconfidence – low ex ante variances compared to ex post (squared) forecast errors – are shown to be relevant for how firms’ form their beliefs about inflation and their inflation forecasts accuracy (firms know what they do not know) and to impact firms’ beliefs about credibility of monetary policy.
Acknowledgments
This paper supersedes Borraz and Zacheo (2022). The views expressed herein are those of the authors and do not necessarily reflect the position of the Banco Central del Uruguay, the Board of Governors of the Federal Reserve, or the Federal Reserve System. We want to thank Juan Dubra and seminar participants at the Board of Governors of the Federal Reserve System, 2024 North American Summer Meeting of the Econometric Society, International Economic Association World Congress 2023, University of Bamberg, Banco Central del Uruguay, and Universidad de la República for their useful comments. We thank the editor and two anonymous referees for their comments and suggestions, which led to a substantial revision of this paper. All remaining errors are ours.
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© 2024 Walter de Gruyter GmbH, Berlin/Boston
Artikel in diesem Heft
- Frontmatter
- Advances
- Corporate Tax Rates, Allocative Efficiency, and Aggregate Productivity
- Contributions
- Endogenous Financial Friction and Growth
- Decomposing Structural Change
- Industry Impacts of US Unconventional Monetary Policy
- Monetary Policy Transmission in Canada – A High Frequency Identification Approach
- Child Labor, Corruption, and Development
- Inflation Uncertainty from Firms’ Perspective, Overconfidence and Credibility of Monetary Policy
- Does Nominal Wage Stickiness Affect Fiscal Multiplier in a Two-Agent New Keynesian Model?
- To Create or to Redistribute? That is the Question
- Estimating Expected Asset Returns with the Present Value Model of Consumption and Fed Forecasts
Artikel in diesem Heft
- Frontmatter
- Advances
- Corporate Tax Rates, Allocative Efficiency, and Aggregate Productivity
- Contributions
- Endogenous Financial Friction and Growth
- Decomposing Structural Change
- Industry Impacts of US Unconventional Monetary Policy
- Monetary Policy Transmission in Canada – A High Frequency Identification Approach
- Child Labor, Corruption, and Development
- Inflation Uncertainty from Firms’ Perspective, Overconfidence and Credibility of Monetary Policy
- Does Nominal Wage Stickiness Affect Fiscal Multiplier in a Two-Agent New Keynesian Model?
- To Create or to Redistribute? That is the Question
- Estimating Expected Asset Returns with the Present Value Model of Consumption and Fed Forecasts