Sarah Lein (Basel) 30.10.2024

This paper analyzes the pass-through of inflation expectations into the prices and wages set by firms. We conduct a survey of firms using a tailored questionnaire, incorporating randomized information treatments to generate exogenous variation in inflation expectations. Our findings show that changes in inflation expectations influence both wages and prices, though the pass-through is incomplete. Moreover, we find that short-term inflation expectations have higher pass-through coefficients than long-term expectations, particularly for prices. The pass-through is conditional on firms' underlying price-setting behavior. To validate our results, we use a hypothetical vignette that does not rely on information treatments and find similar pass-through coefficients.