Information Frictions among Firms and Households

91 Pages Posted: 6 Jan 2021 Last revised: 1 Aug 2022

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 4 versions of this paper

Date Written: November 30, 2020

Abstract

Using surveys of German firms and households, we document novel stylized facts about the extent of information frictions among the two groups. First, firms' expectations about macroeconomic variables are closer to expert forecasts and less dispersed than households', consistent with higher information frictions among households. Second, the degree of dispersion and the distance from expert forecasts varies more across groups of households than across groups of firms. Third, firms update their policy rate expectations less than households when provided with an expert forecast, consistent with firms holding stronger priors. Our results have implications for modeling choices, macroeconomic dynamics, and policies.

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