Information Frictions among Firms and Households

94 Pages Posted: 6 Jan 2021 Last revised: 21 Mar 2021

See all articles by Sebastian Link

Sebastian Link

CESifo (Center for Economic Studies and Ifo Institute) - Ifo Institute; Ludwig Maximilian University of Munich (LMU)

Andreas Peichl

CESifo (Center for Economic Studies and Ifo Institute)

Christopher Roth

University of Warwick, Faculty of Social Studies, Department of Economics, Students

Johannes Wohlfart

University of Copenhagen

Multiple version iconThere are 3 versions of this paper

Date Written: November 30, 2020

Abstract

We leverage survey data from Germany, Italy, and the US to document several novel
stylized facts about the extent of information frictions among firms and households.
First, firms’ expectations about the central bank policy rate, inflation, and aggregate
unemployment are more aligned with expert forecasts and less dispersed than households’. Second, there is substantially more heterogeneity in information frictions
within households than within firms. Third, consistent with firms having stronger
priors, they update their policy rate expectations significantly less compared to households when provided with an expert forecast. Our results have important implications for modeling heterogeneity in macroeconomic models.

Keywords: Information frictions, firms, households, expectation formation, interest rates

JEL Classification: D83, D84, E71

Suggested Citation

Link, Sebastian and Peichl, Andreas and Roth, Christopher and Wohlfart, Johannes, Information Frictions among Firms and Households (November 30, 2020). Available at SSRN: https://ssrn.com/abstract=3739940 or http://dx.doi.org/10.2139/ssrn.3739940

Sebastian Link

CESifo (Center for Economic Studies and Ifo Institute) - Ifo Institute ( email )

Poschinger Str. 5
Munich, 01069
Germany

HOME PAGE: http://www.cesifo-group.de/portal/page/portal/ifoHome/f-about/f3aboutifo/50ifostaff/_ifocv_link_s

Ludwig Maximilian University of Munich (LMU) ( email )

Geschwister-Scholl-Platz 1
Munich, DE Bavaria 80539
Germany

Andreas Peichl

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

Christopher Roth

University of Warwick, Faculty of Social Studies, Department of Economics, Students ( email )

Coventry, CV4 7AL
United Kingdom

Johannes Wohlfart (Contact Author)

University of Copenhagen ( email )

Øster Farimagsgade 5
Building 35
Copenhagen, DK-1353
Denmark

HOME PAGE: http://https://sites.google.com/site/johanneswohlfartecon/home

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