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New Facts about Firms' Inflation Expectations: Simple Tests for a Sticky Information Model

October 29, 2018
Yosuke Uno*1
Saori Naganuma*2
Naoko Hara*3

Abstract

In this paper, we use a large dataset based on firm-level micro-data from the Tankan survey to examine firms' inflation expectations. We first present two basic findings: (i) firms' inflation expectations are downwardly rigid at zero, and (ii) differences in firms' inflation expectations are larger across firm sizes than across sectors. We then report three findings which are in line with predictions of the simple sticky information model proposed by Mankiw and Reis (2002). First, in each period, a number of firms do not revise their expectations. Second, the frequency of forecast revisions is constant over time. Third, our estimates of the frequency of forecast revisions based on the Tankan survey are much smaller than those in previous studies and are much closer to the value that Mankiw and Reis (2002) assumed in their simulation exercises.

JEL classification
E31, E37

Keywords
inflation expectations, frequency of forecast revisions, sticky information model

We thank Ryohei Hisano, Kosuke Aoki, Masahiro Hori, Shigehiro Kuwabara, Toshitaka Sekine, Koji Nakamura, Hibiki Ichiue, Sohei Kaihatsu, Satoshi Ito, Koki Inamura, Ichiro Muto, Toshinao Yoshiba, Takushi Kurozumi, and Ryo Kato for useful comments. All remaining errors are ours. This paper does not necessarily reflect the views of the Bank of Japan.

  1. *1Research and Statistics Department, Bank of Japan
    E-mail : yousuke.uno@boj.or.jp
  2. *2Research and Statistics Department, Bank of Japan (currently at the Financial System and Bank Examination Department)
    E-mail : saori.naganuma@boj.or.jp
  3. *3Research and Statistics Department, Bank of Japan (currently at the Institute for Monetary and Economic Studies)
    E-mail : naoko.hara@boj.or.jp

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