Inflation Expectations and Misallocation of Resources: Evidence from Italy / Tiziano Ropele, Yuriy Gorodnichenko, Olivier Coibion.

Format:

Book

Author/Creator:

Ropele, Tiziano.

Contributor:

Gorodnichenko, Yuriy.

Coibion, Olivier.

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w31190.

NBER working paper series no. w31190

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2023.

Summary:

Using Italian data that includes both inflation forecasts of firms and external information on their balance sheets, we study the causal effect of changes in the dispersion of beliefs about future inflation on the misallocation of resources. We find that as disagreement increases, so does misallocation. In times of low inflation, the aggregate TFP loss of the dispersed expectations-induced misallocation is low, but we argue that it likely becomes quite significant in times of high inflation.

Notes:

April 2023.

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