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Expected Inflation and Firms’ Inventory Adjustment
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TitleExpected Inflation and Firms’ Inventory Adjustment  
AuthorRao Pingui Yue Heng Jiang Guohua  
OrganizationJinan University 
Key WordsExpected Inflation; Adjustment of Inventory; Performance 
AbstractThis paper investigates how expected inflation influences firms’ inventory investment. Using the Price Expectation Index in the depositor survey reported by People’s Bank of China, random walk model and simple Phillips curve model to measure expected inflation, we find that expected inflation influences firms’ inventory investment. In generally, firms will increase their investment in inventory when expected inflation is high. We also find that firms that adjust according to expected inflation perform better than those that do not. Further investigation finds that the adjustment for expected inflation leads to better performance only when the expectation of inflation is accurate. Our study contributes to the literature by investigating the effect of inflation at a firm level and sheds some lights on the relationship between macro policy and micro activities. 
Serial NumberWP449 
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