A0160
Title: The effects of macroeconomic shocks on firms' price and wage inflation expectations
Authors: Martin Weale - Kings College London (United Kingdom) [presenting]
Tomasz Wieladek - Kings College London (United Kingdom)
Abstract: The purpose is to study the effects of macroeconomic shocks on firm-level price and wage inflation expectations in the UK's CBI Industrial Trends Survey. A novel feature is that reduced-form forecast errors are mapped into structural supply and demand shocks for the analysis. The dataset has information on wage, alongside price, inflation expectations from 2012Q2-2024Q3. This allows exploring the differences in wage and price inflation expectation formation before the pandemic and to examine whether the influence of shocks was different from 2020Q2 onwards, from what had been experienced earlier. It is found that supply shocks tend to have more influence on wage and price expectations than do demand shocks. There were marked changes in the effects of both types of shocks during the period from 2020Q2 onwards.
