Information Frictions Among Firms and Households

96 Pages Posted: 31 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: 2021

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.

JEL Classification: D830, D840, E710

Suggested Citation

Link, Sebastian and Peichl, Andreas and Roth, Christopher and Wohlfart, Johannes, Information Frictions Among Firms and Households (2021). CESifo Working Paper No. 8969, Available at SSRN: https://ssrn.com/abstract=3815457

Sebastian Link (Contact Author)

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

University of Copenhagen ( email )

Nørregade 10
Copenhagen, København DK-1165
Denmark

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