Belief-dependent pricing decisions

Frache, Serafin; Lluberas, Rodrigo; Turen, Javier

doi:10.1016/j.econmod.2023.106630

Cited by 1 publication

(1 citation statement)

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“…Coibion, Gorodnichenko, and Kumar (2018) document that even in a country with low and stable inflation, firms have dispersed inflation expectations, a behavior more similar to that of consumer expectations than that of professional forecasters. This fact also holds for developed economies such as the US (Candia, Coibion, and Gorodnichenko, 2021;Garciga et al, 2023), and Germany (Link et al, 2023), and developing economies such as Uruguay (Frache, Lluberas, and Turen, 2024). We find a similar pattern in Colombia and document the dispersion of expectations for the nominal exchange rate against the US dollar.…”

Section: Related Literaturesupporting

confidence: 76%

The Causal Effects of Expected Depreciations

Delgado,

Herreño,

Hofstetter

et al. 2024

Working Paper (Federal Reserve Bank of Cleveland)

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We estimate the causal effects of a shift in the expected future exchange rate of a local currency against the US dollar on a representative sample of firms in an open economy. We survey a nationally representative sample of firms and provide the one-year-ahead nominal exchange rate forecast published by the local central bank to a random sub-sample of firm managers. The treatment is effective in shifting exchange rate and inflation expectations and perceptions. These effects are persistent and larger for non-exporting firms. Linking survey responses with administrative census data, we find that the treatment affects the dynamics of export and import quantities and prices at the firm level, with differential effects for exports to destination countries that use the US dollar as their currency. We instrument exchange rate expectations with the variation induced by the treatment and estimate a positive elasticity of a future expected depreciation in import expenditures.

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