Search Results
Working Paper
No Firm Is an Island? How Industry Conditions Shape Firms’ Expectations
We study how firms’ expectations and actions are affected by both aggregate and industry-specific conditions using a survey of French manufacturing firms. We document an important new stylized fact. In response to industry-level shocks that have no aggregate effects, firms’ aggregate expectations respond persistently. This is consistent with “island” models in which firms use the local prices they observe to make inferences about broader aggregate conditions. We then assess the extent to which these patterns are related to observable characteristics of firms and the industries in ...
Working Paper
Household Beliefs about Fiscal Dominance
We study beliefs about fiscal dominance using a survey of German households. We first design and conduct a randomized controlled trial to identify how fiscal news impacts individuals’ debt-to-GDP and inflation expectations. We document that the link between debt and inflation crucially depends on individuals’ views about the fiscal space. News leading individuals to expect a higher debt-to-GDP ratio makes them more likely to revise their inflation expectations upward. These average effects are driven by individuals who think that fiscal resources are stretched. By contrast, individuals ...