Mining the Gap: Extracting Firms’ Inflation Expectations From Earnings Calls
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Summary:
Using a novel approach involving natural language processing (NLP) algorithms, we construct a new cross-country index of firms' inflation expectations from earnings call transcripts. Our index has a high correlation with existing survey-based measures of firms' inflation expectations, it is robust to external validation tests and is built using a new method that outperforms other NLP algorithms. In an application of our index to United States, we uncover some facts related to firm's inflation expectations. We show that higher expected inflation translates into future inflation. Going into the firms level dimension of our index, we show departures from a rational framework in firms' inflation expectations and that firms' attention to the central enhances monetary policy effectiveness.
Series:
Working Paper No. 2023/202
Subject:
Artificial intelligence Consumer price indexes Financial institutions Futures Inflation Labor Prices Technology Wages
Frequency:
regular
English
Publication Date:
October 4, 2023
ISBN/ISSN:
9798400253522/1018-5941
Stock No:
WPIEA2023202
Format:
Paper
Pages:
46
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