Monetary policy announcements and expectations: Evidence from german firms

Abstract

We assess empirically whether monetary policy announcements impact firm expectations. Two features of our data set are key. First, we rely on a survey of production and price expectations of German firms, that is, expectations of actual price setters. Second, we observe the day on which firms submit their answers to the survey. We compare the responses of firms before and after monetary policy surprises and obtain two results. First, firm expectations respond to policy surprises. Second, the response becomes weaker as the surprise becomes bigger. A contractionary surprise of moderate size reduces firm expectations, while a moderate expansionary surprise raises them. Large surprises, both negative and positive, fail to alter expectations. Consistent with this result, we find that many of the ECB's announcements of non-conventional policies did not affect expectations significantly. Overall, our results are consistent with the notion that monetary policy surprises generate an information effect which is endogenous to the size of the policy surprise.

The Role of Information and Experience for Households' Inflation Expectations

“…Interestingly, in both treatments the fraction of individuals who increase their inflation expectations is higher than the fraction of those who decrease inflation expectations. Although this behaviour is at odds with standard theory, it is has been previously observed for households and is in line with an information effect of the increase in the interest rate, i.e., households infer from the policy rate change that the central bank has a more positive view on the current state of the economy than the household previously thought, see Eminidou et al (2020) or Enders et al (2019) in the context of a firm survey.…”

A survey of empirical findings on unconventional central bank policies

“…New communication strategies are suggested for rendering the management of inflation expectations more effective. Enders et al (2019) investigate whether monetary policy announcements affect firm expectations. In order to do so, they use a survey of production and price expectations of German firms.…”

Expected effects of the US tax reform on other countries: global and local survey evidence

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