Firms’ asset holdings and inflation expectations

This paper investigates the relationship between firms’ inflation expectations and their
holdings of liquid assets. We implement a new quantitative survey of firms’ expectations
about inflation in New Zealand. We find that firms that hold more shares of liquid assets
systematically report lower inflation expectations. Moreover, we implement an experiment
by providing firms new exogenous information about recent inflation dynamics. This
experiment allows us to assess how firms respond to new information in terms of belief
revisions and firm-level decisions.