Contracts and firms’ inflation expectations

Vol: 
85/2021
Author name: 
Kumar S
Wesselbaum D
Year: 
2021
Month: 
October
Abstract: 

We use novel survey data to study firms’ inventory contracts. We document facts about the usage of purchase and sale contracts. We find that firms purchase and sell inventory through three contractual arrangements: fixed price and quantity, fixed price only, and fixed quantity only. The former holds the largest share of contracts. The average duration of purchase contracts is not very different from the average duration of sale contracts. We then find that the upward bias in inflation expectations is a feature of firms that do not purchase or sell largely through contracts. Our findings are useful in the calibration of sticky price models.

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