Working Papers

Expectations for Gasoline Prices and Inflation: Evidence from Households With Karl Whelan, Constantin Burgi.

Revise and Resubmit JMCB

Abstract

Gasoline prices are highly salient to consumers and, for this reason, they may have an outsized influence on their thinking about inflation. We examine how people’s expectations about gasoline prices influence their expectations for overall inflation. We find little evidence from two US household surveys that people over-react to their beliefs about expected gasoline prices when formulating their expectations about overall inflation.

Firm Climate Investment: A Glass Half-Full With Ivan Yotzov, Nicholas Bloom, Philip Bunn, Paul Mizen, Gregory Thwaites.

Abstract

We analyze the importance of climate-related investment using a large economy-wide survey of UK firms. Over half of firms expect climate change to have a positive impact on their investment in the medium term, with around a quarter expecting a large impact of over 10%. Around two-thirds of these investments are expected to be in addition to normal capital expenditure, with some firms investing less elsewhere. These investments will be driven by larger firms as well as those in more energy-intensive sectors. Climate investments are expected mainly in switching to green energy sources and improving energy efficiency, and firms expect to finance these mainly using internal cash reserves. Overall, although firms are expecting to invest more resources in adapting to climate change, under reasonable assumptions, these investments are still not sufficient to meet the estimated targets implied by the UK Net Zero Pathway.

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Work in Progress

Role of Inflation Uncertainty on Household Wage Growth Expectations (JMP) With Philip Schnattinger.

Draft coming soon!

Abstract

In this paper, we examine the heterogeneous effects of individual-level uncertainty about prices (subjective uncertainty) on wage growth expectations, using data from the FRBNY Survey of Consumer Expectations. Our analysis focuses on how the first moment (level) and second moment (uncertainty) of expected inflation influence wage expectations during uncertain times and how these effects vary across the income distribution. We employ a novel instrument constructed from survey responses to capture these dynamics. Our findings indicate that individual-level expected inflation uncertainty is positively associated with wage growth expectations. Furthermore, higher inflation uncertainty is linked to a larger increase in wage expectations among low-income households. We attribute this mechanism to the impact of inflation uncertainty on job search behavior, where greater uncertainty prompts more job searching and EE behavior, thereby driving wage growth. Consequently, inflation uncertainty may serve as an additional factor contributing to wage growth, particularly for lower-income workers.

Measuring Cognitive Inflation Uncertainty: FRBNY With Philip Schnattinger.

Draft coming soon!

Abstract

This article uses the Federal Reserve Bank of New York's Survey of Consumer Expectations (FRBNY SCE) to study household cognitive inflation uncertainty. We incorporate existing literature on cognition with expectations to uncover what goes into expected inflation uncertainty. This paper uses the round-number methods to create commodity uncertainty since June 2013.

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