Tell Me Something I Don’t Already Know: Learning in Low and High-Inflation Settings

Weber, Michael; Candia, Bernardo; Ropele, Tiziano; Lluberas, Rodrigo; Frache, Serafín; Meyer, Brent; Kumar, Saten; Gorodnichenko, Yuriy; Georgarakos, Dimitris; Coibion, Olivier; Kenny, Geoff; Ponce, Jorge

doi:10.3386/w31485

Cited by 10 publications

(6 citation statements)

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“…In addition, we show that exchange rate expectations are relevant information for firms' trade decisions. Candia, Coibion, and Gorodnichenko (2023) review the available evidence and make clear that there are very few surveys of firms' exchange rate expectations.…”

Section: Related Literaturementioning

confidence: 99%

“…A key regressor in specification 1 is X e i,t,t , the nowcast of variable X by firm i in period t. As shown in Weber et al (2023), the sum of coefficients β 2 + β 3 captures the weight assigned to the prior by firms in the treatment group, and β 2 captures the weight assigned to the prior by firms in the control group. Therefore, β 3 captures the differential weight on the prior due to the effect of the signal contained in the treatment.…”

Section: Treatment Effects On the Formation Of Expectationsmentioning

confidence: 99%

“…One of the main contributions of this manuscript is to compute the causal effects of an exchange rate depreciation on expected inflation. There is a large literature estimating the causal effects of shifts in expected inflation both empirically (for a review of articles see Candia, Coibion, and Gorodnichenko, 2023) and theoretically Werning (2022). We estimate an expectational passthrough of an exchange rate depreciation to inflation expectations by estimating the following regression…”

Section: Dynamic Causal Effectsmentioning

confidence: 99%

“…The slope between inflation perceptions and inflation expectations is between 50 percent to 66 percent as large as that for firms in the treatment group compared with firms in the control group. While informed, firms still learn from public information and adjust their forecast, suggesting uncertainty or inattention about macroeconomic variables (Weber et al, 2023). These patterns not only hold at the time of the treatment but are persistent for several months.…”

Section: Introductionmentioning

confidence: 99%

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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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Section: Related Literaturementioning

confidence: 99%

Section: Treatment Effects On the Formation Of Expectationsmentioning

confidence: 99%

Section: Dynamic Causal Effectsmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

The Causal Effects of Expected Depreciations

Delgado,

Herreño,

Hofstetter

et al. 2024

Working Paper (Federal Reserve Bank of Cleveland)

View full text Add to dashboard Cite

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“…Coibion et al (2023) leverage the exogenous variation in households' inflation expectations resulting from information treatments to examine the causal effect of beliefs on consumption decisions. Weber et al (2023) study the effects of economic conditions on the learning process of households and firms. Furthermore, using non-experimental high-frequency text and audio data, Gorodnichenko, Pham and Talavera (2023) study the effects of emotions communicated during FOMC press conferences on stock prices.…”

Section: Introductionmentioning

confidence: 99%

Seeing and Hearing is Believing: The Role of Audiovisual Communication in Shaping Inflation Expectations

Ash,

Mikosch,

Perakis

et al. 2024

SSRN Journal

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The Bias of the ECB Inflation Projections: A State‐Dependent Analysis

Granziera,

Jalasjoki,

Paloviita

2024

Journal of Forecasting

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We test for state‐dependent bias in the European Central Bank's inflation projections. We show that the Eurosystem/European Central Bank (ECB) tends to underpredict when the observed inflation rate at the time of forecasting is higher than an estimated threshold of 1.8%. The bias is most pronounced at intermediate forecasting horizons. This suggests that inflation is projected to revert towards the target too quickly. These results cannot be fully explained by the persistence embedded in the forecasting models or by errors in the exogenous assumptions on interest rates, exchange rates, or oil prices. The state‐dependent bias may be consistent with the aim of managing inflation expectations, as published forecasts play a central role in the ECB's monetary policy communication strategy.

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Tell Me Something I Don’t Already Know: Learning in Low and High-Inflation Settings

Cited by 10 publications

References 0 publications

The Causal Effects of Expected Depreciations

The Causal Effects of Expected Depreciations

Seeing and Hearing is Believing: The Role of Audiovisual Communication in Shaping Inflation Expectations

The Bias of the ECB Inflation Projections: A State‐Dependent Analysis

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