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Business confidence is crucial to firm decisions, but it is deeply related to professional forecasters' expectations. Since Brazil is an important inflation targeting country, this paper investigates whether monetary policy credibility and disagreements in inflation and interest rate expectations relate to business confidence in Brazil. The study considers the aggregate business confidence index and the business confidence indexes for 11 industrial sectors in Brazil.

The authors run ordinary least squares and generalized method of moments regressions to assess the direct effects of disagreements in expectation and monetary policy credibility on business confidence. The authors also make use of Wald test of parameter equality to observe whether there are “offsetting effects” of monetary credibility in mitigating the effects of both disagreements in expectations on business confidence. Besides, the authors run quantile regressions to analyze the effect of the main explanatory variables of interest on business confidence in contexts where business confidence is low (pessimistic) or high (optimistic).

Disagreements in inflation expectations reduce business confidence, monetary policy credibility improves business confidence and credibility mitigates the adverse effects of disagreements in expectations on business confidence. The sectors most sensitive to monetary policy credibility are Rubber, Motor Vehicles, Metallurgy, Metal Products and Cellulose. The findings also suggest the effect of disagreement in inflation expectations on business confidence decreases as confidence increases, and the effect of monetary policy credibility on business confidence increases as entrepreneurs are more optimistic.

While there is evidence that monetary policy credibility is beneficial to the economy, there are no studies on the effects of disagreements in inflation and interest rate expectations on business confidence (at the aggregate and sectoral levels). Besides, there are no studies that have investigated whether monetary policy credibility can mitigate the effects of disagreements in inflation and interest rate expectations on business confidence (at the aggregate and sectoral levels). Therefore, there are gaps to be filled in the literature addressing business confidence, monetary policy credibility and disagreements in expectations. These issues are particularly important to inflation targeting developing countries.

Credit rating agencies (CRAs) are perceived as highly influential in the financial system since their announcements can affect several players in the financial markets, from big private financial and non-financial companies and their financial markets experts to sovereign states. In this sense, this study investigates whether sovereign credit news issued by CRAs (measured by comprehensive credit rating (CCR) variables) affect the uncertainties about the exchange rate in the future (captured by the disagreement about exchange rate expectations). The study is relevant once there is evidence indicating that CRAs' assessments are responsible for affecting international capital flows and, thus, sovereign rating changes can affect the expectations formation process regarding the exchange rate. In addition, there is evidence indicating that the disagreement about exchange rate expectations affects the disagreement about inflation expectations, which brings consequences to policymakers.

The dependent variables are the disagreement in expectations about the Brazilian exchange rate for different forecast horizons, 12, 24 and 36 months ahead and the first principal component of theses series. On the other hand, the CCR variables are built upon the long-term foreign-currency Brazilian bonds ratings, outlooks and credit watches provided by the main CRAs. Estimates are obtained using ordinary least squares (OLS) and generalized method of moments (GMM); a dynamic analysis is performed using vector-autoregressive (VAR) through impulse-response functions.

Negative (positive) sovereign credit news, given by a rating downgrade (upgrade) and/or a negative (positive) outlook/watch status, increase (decrease) the disagreement about exchange rate expectations. This result holds for all disagreement and CCR variables.

The study brings practical implications to both private agents (mainly financial market experts) and policymakers. An important practical implication of the study concerns the ability of CRAs to affect the expectations formation process of financial market experts regarding the future behavior of the exchange rate. When a CRA issues a signal of improvement in a country's sovereign rating, this signal reflects the perception of improvement in macroeconomic fundamentals and reduction of uncertainties about the country's ability to honor its financial obligations, which therefore, facilitates the expectations formation process, causing a reduction in the disagreement about the exchange rate expectations. With respect to the consequences for policymakers, they will have more difficulty in guiding expectations in a country with a worse sovereign risk rating, where agents have difficulties in forming expectations and the disagreement in expectations is greater.

The study is the first to analyze the impact of CRAs' announcements on the disagreement about exchange rate expectations. Moreover, it connects the literature that investigates the effects of sovereign credit news on the economy with the literature that examines the main determinants of disagreement in expectations about macroeconomic variables.

The Inflation Expectations Survey of Households, conducted by the Reserve Bank of India (RBI), indicates that there is considerable disparity in inflation expectations across cities in India. The purpose of this paper is to investigate why different cities exhibit heterogeneous inflation expectations despite coming under a central monetary policy umbrella.

First, the correspondence between city-level inflation expectations and city-specific economic characteristics is mapped. Second, how the disagreement in inflation expectations across cities, measured by dispersion, behaves over the business cycle is investigated. Finally, using seemingly unrelated regression technique, the economic factors that play a role in explaining inflation expectations heterogeneity across cities are estimated.

Cities with higher economic activity and cost of living have higher inflation expectations. Disagreement across cities regarding inflation expectations rise with an increase in output gap and inflation. Information friction plays an important role in explaining the disparity in inflation expectations across cities, and the effects of macro-level factors vary across cities, thereby accentuating expectations dispersion.

Monetary policy-related communication by the RBI (toward the general public) should increase in order to address information friction, which, in turn, would temper down the extent of inflation expectations heterogeneity across cities in India.

This is a novel application of the data from the monetary policy perspective. Heterogeneity in inflation expectations across cities or regions is an unexplored area. The use of nightlights as a proxy for city-level economic activity in India (in absence of data on city-level income) is another original contribution.

This paper investigates the role of economic disagreement in the cross-sectional pricing of individual stocks. Economic disagreement is quantified with ex ante measures of cross-sectional dispersion in economic forecasts from the Survey of Professional Forecasters (SPF), determining the degree of disagreement among professional forecasters over changes in economic fundamentals.

The authors introduce a broad index of economic disagreement based on the innovations in the cross-sectional dispersion of economic forecasts for output, inflation and unemployment so that the index is a shock measure that captures different aspects of disagreement over economic fundamentals and also reflects unexpected news or surprise about the state of the aggregate economy. After building the broad index of economic disagreement, the authors test out-of-sample performance of the index in predicting the cross-sectional variation in future stock returns.

Univariate portfolio analyses indicate that decile portfolios that are long in stocks with the lowest disagreement beta and short in stocks with the highest disagreement beta yield a risk-adjusted annual return of 7.2%. The results remain robust after controlling for well-known pricing effects. The results are consistent with a preference-based explanation that ambiguity-averse investors demand extra compensation to hold stocks with high disagreement risk and the investors are willing to pay high prices for stocks with large hedging benefits. The results also support the mispricing hypothesis that the high disagreement beta provides an indirect way to measure dispersed opinion and overpricing.

Most literature measures disagreement about individual stocks with the standard deviation of earnings forecasts made by financial analysts and examines the cross-sectional relation between this measure and individual stock returns. Unlike prior studies, the authors focus on disagreement about the economy instead of disagreement about earnings growth. The authors' argument is that disagreement about the economy is a major factor that would explain disagreement about stock fundamentals. The authors find that disagreement in economic forecasts does indeed have a significant impact on the cross-sectional pricing of individual stocks.

From these data, the authors construct an uncertainty index through the use of a vector autoregressive (VAR) model to measure the impact of uncertainty on GDP, controlling for inflation, which may affect macroeconomic performance. Results indicate that uncertainty is negatively correlated with the economic cycle and the inter-annual variation of the biannual average product.

This study empirically explores the dynamics of expectations of the Uruguayan manufacturing firms about industrial economic growth. This study explores the dynamics of the industrial economic growth expectations of Uruguayan manufacturing firms. The empirical research is based on firms' expectations data collected through a monthly survey carried out by the Chamber of Industries of Uruguay (CIU) in 2003–2018.

Granger causality tests show that uncertainty Granger-causes industrial production growth and a one standard deviation shock on uncertainty generates a contraction in the industrial production growth rate. Finally, the authors use statistical and network tools to identify groups of firms with similar performance on expectations. Results show that higher uncertainty is associated with smaller, more interconnected groups of firms, and that the number of homogeneous groups and the distance between groups increases with uncertainty. These findings suggest that policies focused on the coordination of expectations can lead to the development of stable opinion groups.

The paper introduces new data and new methodologies to analyze the dynamics of expectations of manufacturing firms about industrial economic growth.

1. An empirical approach to compare expectations of firms is introduced.

2. The occurrence of groups of opinion is tested.

3. Central companies in the network of expectations are detected.

4. More uncertainty implies a higher degree of discrepancy between the overall firm’s opinions and more compact opinion groups.

An empirical approach to compare expectations of firms is introduced.

The occurrence of groups of opinion is tested.

Central companies in the network of expectations are detected.

More uncertainty implies a higher degree of discrepancy between the overall firm’s opinions and more compact opinion groups.

This study explores the impact of parents’ and children’s early expectations on children’s later school persistence and completion of compulsory and secondary education, paying special attention to the parent-child agreement in early educational expectations. Results from analyzing longitudinal data from the Gansu Survey of Children and Families (GSCF) show that children often carry educational expectations quite different from their parents’. Consistent with previous research, children’s and their parents’ early expectations are strong predictors of children’s later educational attainment. More importantly, the analysis reveals that children benefit greatly when they share with their parents’ high expectations. Those children whose high expectations aligned with their parents fair best in later educational outcomes: They are more likely to complete compulsory education and secondary education. The combined determination of parents and children can help moderate the negative impact of poverty and facilitate children’s continued efforts in fulfilling their expectations. This positive impact holds even for children from the most impoverished families. This study points to the importance to recognize that there are non-material resources that family could provide to advance children’s education.

The purpose of this paper is to identify the mechanisms adopted by the distribution channel of a leading Brazilian truck manufacturing company, which generates various conflicts that have a negative impact on the performance of the channel operations, with a focus on the conflict causes. The study aims to expand the domain of distribution channel conflict management as a benchmark activity by exploring the potential sources of conflict occurring in a major Brazilian distribution channel.

The research method is exploratory, using a case study from a major company of the automotive sector of Serra Gaúcha, Brazil. The distribution processes are analyzed in a real and specific context, implemented by means of individual, in‐depth interviews, with the application of a basic script of questions.

The findings indicate the existence of seven potential sources of conflict and 23 conflicting issues, considered relevant and of negative impact on the distribution channel performance of the manufacturing company.

The sample cannot be considered as representative but it is, to a certain point, reliable because it refers to one entity only.

The results of this research can serve as indicators for managers of a company to invest time and the necessary resources for the maintenance and consolidation of the relationships with its dealerships.

The present work shows its originality through the study of consumers' preference for determined products and services as a conflict management basis for Brazilian national distribution channels' stakeholders. In this context, a distribution channel conflict case study may constitute an important empirical source of data for a benchmark strategy.

Using a fiscal sentiment indicator, this study aims to verify whether fiscal sentiment affects the yield curve in Brazil. Since policymakers highlight the coordination between monetary and fiscal policies and the importance of fiscal policy to the expectations formation process in inflation targeting regimes, the authors also explore the transmission mechanism through inflation expectations. Hence, the study also analyzes the effect of fiscal sentiment on interest rate swap spreads through the inflation expectations channel.

Based on information obtained from official communiqués about fiscal policies issued by the Central Bank of Brazil and the Brazilian Ministry of Finance, the study builds a fiscal sentiment indicator. The econometric strategy to verify whether fiscal sentiment is related to the short tail of the yield curve is based on time series analysis through ordinary least squares and generalized method of moments estimates. In turn, to estimate the transmission mechanism through inflation expectations, the model uses interaction terms between fiscal sentiment and inflation expectations.

The results suggest a more optimistic (pessimistic) fiscal sentiment reduces (increases) swap spreads. The findings reveal that improvements in fiscal credibility and a more optimistic fiscal sentiment are able to reduce the positive marginal effect that inflation expectations variations have on interest rate swap spreads.

This study contributes to the literature, as, to the best of authors’ knowledge, it is the first to analyze the content of the communiqués related to fiscal policy, and based on this content, it extracts the sentiment related to the fiscal environment and analyzes the effect of this sentiment on the yield curve. Besides, different from existing studies that analyze the effect of fiscal backward-looking aspects (such as public debt, budget balance, taxes and public spending) on the yield curve, this study investigates forward-looking aspects related to fiscal policy (such as fiscal credibility and fiscal sentiment).

Since sovereign ratings provided by credit rating agencies (CRAs) are a key determinant of the interest rates a country faces in the international financial market and once sovereign ratings may have a constraining impact on the ratings assigned to domestic banks or companies, some studies have focused on identifying the determinants of sovereign credit risk assessments provided by CRAs. In particular, this study estimates the effect of fiscal credibility on sovereign risk using four different comprehensive credit rating (CCR) measures obtained from CRAs' announcements and two different fiscal credibility indicators.

We build comprehensive credit rating (CCR) measures to capture sovereign risk. These measures are calculated using sovereign ratings, the rating outlooks and credit watches issued by the three main credit rating agencies (S&P, Moody's and Fitch) for long-term foreign-currency Brazilian bonds. Based on monthly data from 2003 to 2018, we use different econometric estimation techniques in order to provide robust results.

The results indicate that fiscal credibility exerts both short- and long-run effects on sovereign risk perception, and macroeconomic fundamentals are important long-run determinants.

Since fiscal credibility reflects the government's ability to maintain budgetary balance and sustainable public debt, the government should keep its commitment to responsible fiscal policies so as not to deteriorate expectations formed by financial market experts about the fiscal scenario and, thus, to achieve better credit assessments issued by CRAs with respect to sovereign debt bonds. Sovereign credit rating assessment is a voluntary practice. It is up to the country whether they want to apply for a rating assessment or not. Thus, without a sovereign rating, one must find an alternative to measure the sovereign risk of a country. In this sense, an important practical implication that this study provides is that fiscal credibility can be used as a leading indicator of sovereign risk perceptions obtained from CRAs or even as a proxy for sovereign risk.

This paper is the first to verify how important the expectations of financial market experts in relation to the fiscal effort required to keep public debt at a sustainable level (i.e. fiscal credibility) are to sovereign risk perception of credit rating agencies. In this sense, the study is the first to address this relation, and thus it contributes to the literature that seeks to understand the determinants of sovereign ratings in emerging countries.

This study estimates the effects of political uncertainty and economic policy uncertainty on business confidence. Moreover, it also examines business confidence as a transmission channel of political uncertainty and economic policy uncertainty to investment.

The study addresses the Brazilian case from May 2004 to December 2017. Brazil experienced situations of political instability and public distrust in government and its policies, which reflected on the economic environment. The study uses two business confidence indicators that capture entrepreneurs' sentiment in relation to their business and the economy. All models are estimated using ordinary least squares and generalized method of moments.

The estimates reveal that increases in both political uncertainty and economic policy uncertainty reduce business confidence. The findings also indicate that business confidence acts as a transmission mechanism, i.e. uncertainties affect investments through business confidence.

The findings point to the following practical implications related to the existence of uncertainties in the Brazilian economy: different institutional difficulties and government indecisions have blurred the political scene and caused political uncertainties. In addition, the same aspects that blurred the political scene also caused uncertainties in relation to economic policy that undermined business confidence, and affected investment.

There is a vast literature on business confidence, as well as studies addressing the relationship between business confidence and investment. This study differs from other studies as follows: in addition to the political uncertainty, it also analyzes the effect of economic policy uncertainty on business confidence; it uses different measures to capture political instability, and it analyzes whether business confidence acts as a transmission channel of both uncertainties to investments.