Inflation Expectations and Misallocation of Resources: Evidence from Italy t

Using Italian data that include both inflation forecasts of firms and external information on their balance sheets , we study the causal effect of changes in the dispersion of beliefs about future inflation on the misallocation of resources. We find that as disagreement increases , so does misallocation. In times of low inflation , the aggregate TFP loss of the dispersed expectation -induced misallocation is moderate , but we argue that it likely becomes quite significant in times of high inflation. ( JEL D22, D83, D84, E31, E37 )