Firms' expectations and price-setting: Evidence from micro data

Arbeitspapier

In many forward-looking macroeconomic models, such as the New Keynesian model, firms' expectations about the future play a key role in determining outcomes today. We examine this hypothesis using a novel panel dataset on firms actual and expected price changes collected by the Confederation of British Industry. Our microeconometric approach overcomes the identification issues faced by previous empirical studies. The results suggest that firms' expectations play a key role in their price-setting behaviour, with a coefficient on firm's expectations consistent with the discount factor typically assumed in macroeconomic models.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: External MPC Unit Discussion Paper ; No. 48

Classification and Topics

• Classification: Wirtschaft ; Single Equation Models; Single Variables: Panel Data Models; Spatio-temporal Models ; Single Equation Models: Single Variables: Instrumental Variables (IV) Estimation ; Price Level; Inflation; Deflation
• Subject: Pricing-setting ; survey data ; inflation expectations ; New Keynesian Phillips Curve

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Boneva, Lena ; Cloyne, James ; Weale, Martin ; Wieladek, Tomasz
• Event: Veröffentlichung
• (who): Bank of England, External Monetary Policy Committee Unit
• (where): London
• (when): 2016

Further information

• Handle: http://hdl.handle.net/10419/173462
• Last update: 10.03.2025, 11:43 AM CET