In this seminar Saten Kumar will provide an overview of his recent paper, ‘How Do Firms Form Their Expectations? New Survey Evidence’. Saten implements a new survey of firms’ macroeconomic beliefs in New Zealand and document a number of novel stylised facts from this survey. Despite nearly 25 years under an inflation targeting regime, there is widespread dispersion in firms’ beliefs about both past and future macroeconomic conditions, especially inflation, with average beliefs about recent and past inflation being much higher than those of professional forecasters. Saten concludes that much of the dispersion in beliefs can be explained by firms’ incentives to collect and process information, i.e. rational inattention motives. For example, firms which face more competitors or firms which expect to change their prices sooner have systematically better macroeconomic information.

Dr Saten Kumar is a Senior Lecturer in the Economics Department at Auckland University of Technology. He works on macroeconomic topics, including monetary policy, firms’ price setting behaviour, agents’ macroeconomic expectations, inflation measurement and the welfare costs of inflation. His recent works have utilized primary quantitative surveys to analyse the crucial issues in the above topics.

The CAMA Macroeconomics Brown Bag Seminars offer CAMA speakers, in particular PhD students, an opportunity to present their work in progress in front of their peers, and reputable visitors to showcase their work.