Auckland University of Technology
55 Wellesley St
Auckland, 1010, New Zealand
NBER Working Papers and Publications
|December 2015||Inflation Targeting Does Not Anchor Inflation Expectations: Evidence from Firms in New Zealand|
with Hassan Afrouzi, Olivier Coibion, Yuriy Gorodnichenko: w21814
We study the (lack of) anchoring of inflation expectations in New Zealand using a new survey of firms. Managers of these firms display little anchoring of inflation expectations, despite twenty-five years of inflation targeting by the Reserve Bank of New Zealand, a fact which we document along a number of dimensions. Managers are unaware of the identities of central bankers as well as central banks’ objectives, and are generally poorly informed about recent inflation dynamics. Their forecasts of future inflation reflect high levels of uncertainty and are extremely dispersed as well as volatile at both short and long-run horizons. Similar results can be found in the U.S. using currently available surveys as shown in Binder (2015).
Published: Saten Kumar & Hassan Afrouzi & Olivier Coibion & Yuriy Gorodnichenko, 2015. "Inflation Targeting Does Not Anchor Inflation Expectations: Evidence from Firms in New Zealand," Brookings Papers on Economic Activity, vol 2015(2), pages 151-225. citation courtesy of
|April 2015||How Do Firms Form Their Expectations? New Survey Evidence|
with Olivier Coibion, Yuriy Gorodnichenko: w21092
We implement a new survey of firms’ macroeconomic beliefs in New Zealand and document a number of novel stylized facts from this survey. Despite nearly twenty-five years under an inflation targeting regime, there is widespread dispersion in firms’ beliefs about both past and future macroeconomic conditions, especially inflation, with average beliefs about recent and past inflation being much higher than those of professional forecasters. Much of the dispersion in beliefs can be explained by firms’ incentives to collect and process information, i.e. rational inattention motives. Using experimental methods, we find that firms update their beliefs in a Bayesian manner when presented with new information about the economy. But few firms seem to think that inflation is important to their busine...