Despite our best efforts, many of us often continue to live in the past. Do firms also suffer from similar drawbacks? As part of a survey, researchers Olivier Coibion, Yuriy Gorodnichenko and Saten Kumar found that, operating under a regime that was battling inflation, many firms estimated present, past and future inflation to be higher than usual — more than estimates by professional forecasters — despite easy availability of accurate data. But, despite these beliefs, very few firms thought this phenomenon affected their business decisions; many didn’t even bother collecting information about it. Missing the wood for the trees?
Title: How Do Firms Form Their Expectations? New Survey Evidence
Source: The National Bureau of Economic Research
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