The paper received the "Peter Sinclair Prize" as the 2nd best paper at the Macro, Monetary and Finance (MMF) PhD Conference
I examine price-setting behaviour across 52 sectors in the UK by estimating Sectoral Phillips Curves (SPCs) using heterogeneous panel methods. First, I enhance the identification of the SPC by using a confidential survey dataset on direct measures of firms' expectations, labour costs, and supplier prices; thus alleviating a very common weak identification issue discussed in the literature. Second, I take into account input-output linkages, which are typically overlooked in traditional Phillips Curve estimations. I find significant and positive SPC parameters, reaffirming the importance of future expected inflation in firms' price setting and the key role of sectoral data in identifying the Phillips Curve slope. Also, I find larger slopes when sectoral linkages are taken into account. Third, I uncover substantial heterogeneity across industries in terms of forward- and backward-looking behaviour and cost responsiveness. Delving into potential sources of heterogeneity, expectations play a larger role in the price-setting decisions of firms in more concentrated sectors.
Presented at: CEF 2023, Edinburgh-Nottingham Macro PhD Workshop 2023, ESCoE 2023, IAAE 2023, MMF PhD Conference 2023, and Warwick PhD Conference 2023.
We investigate factors influencing pricing behaviour in the UK using microdata from firm-level surveys. Our goals include uncovering the role of expectations and marginal costs through firm-level pricing equations, exploring strategic interactions within industries, and assessing cross-industry price spillovers via supply chains. This unique dataset comprises firms' own and sectoral price perceptions and expectations, firm size, turnover data, and other relevant characteristics at both the firm and industry levels. Leveraging this time series panel dataset enables us to incorporate firm-fixed effects, sector-specific fixed effects, and detailed 2-digit SIC industry fixed effects, ensuring a robust control for confounding factors.
Presented at: Kiel University (co-author presented), CFE-CMStatistics (co-author will present)
In this paper we first study how firms form their understanding of past and future sectoral inflation through two of the most comprehensive and used hypotheses on the formation of expectations: the full-information rational expectations (FIRE) and sticky information hypotheses (SIRE). Second, we combine these hypotheses with the price setting behaviour theory (Phillips Curve) within a VAR framework and test the system with data.
This report replicates and examines Bauer et al.'s (2021) paper on monetary policy transmission to financial markets. The paper introduces novel measures of monetary policy uncertainty and analyses its drivers. It also investigates the impact of uncertainty changes on interest rates and financial asset prices. We assess reproducibility, consolidate market uncertainty measures using PCA and Factor Analysis, and rigorously test the reduction of uncertainty after Federal Market Open Committee (FOMC) announcements. Our findings support the paper's claim of reduced uncertainty on meeting days. Additionally, we explore the implications of the uncertainty channel on various financial assets, such as Gold, the Swiss Franc, European stock indexes, and Bitcoin.