Davud Rostam-Afschar // University of MannheimTo the profile
What Can We Learn from Survey Experiments?Research Seminars
Design, Challenges and Opportunities
Using a customized firm survey and randomized experiment, the paper presented in this ZEW Research Seminar investigates how firms’ inflation expectations shape their price setting. Consistent with Calvo pricing, the authors establish that firms fully pass through inflation expectations to prices in times of high inflation. When informed about central bank inflation forecasts, firms indicate plans to increase prices by 22 per cent less than their untreated peers. In addition, treated firms pass through less of their pre-treatment inflation expectations than control-group firms. When receiving additional central bank forecasts on energy and labor cost developments, the updating of passthrough is even stronger. This suggests that inflation forecast communication shifts expectations and prices and can be an effective policy tool.
- Room 1