Bank of Italy
Economic Research Unit, Milano Branch
Via Cordusio, 5
Institutional Affiliation: Bank of Italy
Information about this author at RePEc
NBER Working Papers and Publications
|March 2020||A Quantitative Analysis of Distortions in Managerial Forecasts|
with Yueran Ma, David Sraer, David Thesmar: w26830
This paper quantifies the economic costs of distortions in managerial forecasts. We match a unique managerial survey run by the Bank of Italy with administrative data on firm balance sheets and income statements. The resulting dataset allows us to observe a long panel of managerial forecast errors for a sample of firms representative of the Italian economy. We show that managerial forecast errors are positively and significantly autocorrelated. This persistence in forecast error is consistent with managerial underreaction to new information. To quantify the economic significance of this forecasting bias, we estimate a dynamic equilibrium model with heterogeneous firms and distorted expectations. The estimated model matches not only the persistence of forecast errors, but the empiric...
|December 2018||Inflation Expectations and Firm Decisions: New Causal Evidence|
with Olivier Coibion, Yuriy Gorodnichenko: w25412
We use a unique design feature of a survey of Italian firms to study the causal effect of inflation expectations on firms’ economic decisions. In the survey, a randomly chosen subset of firms is repeatedly treated with information about recent inflation whereas other firms are not. This information treatment generates exogenous variation in inflation expectations. We find that higher inflation expectations on the part of firms leads them to raise their prices, increase demand for credit, and reduce their employment and capital. However, when policy rates are constrained by the effective lower bound, demand effects are stronger, leading firms to raise their prices more and no longer reduce their employment.
Published: Olivier Coibion & Yuriy Gorodnichenko & Tiziano Ropele, 2020. "Inflation Expectations and Firm Decisions: New Causal Evidence*," The Quarterly Journal of Economics, vol 135(1), pages 165-219. citation courtesy of