Firm expectations and economic activity
We assess how survey expectations impact production and pricing decisions on the basis of a large panel of German firms. We identify the causal effect of expectations by matching firms with the same fundamentals but different views about the future. The probability to raise (lower) production is 15...
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| Main Authors: | , , |
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| Format: | Book/Monograph Working Paper |
| Language: | English |
| Published: |
Munich, Germany
CESifo, Center for Economic Studies & Ifo Institute
[2019]
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| Series: | CESifo working paper Category 6, Fiscal policy, macroeconomics and growth
no. 7623 (April 2019) |
| In: |
CESifo working papers (no. 7623 (April 2019))
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| Subjects: | |
| Online Access: | Resolving-System, kostenfrei, Volltext: http://hdl.handle.net/10419/198983 Verlag, kostenfrei, Volltext: http://www.cesifo-group.de/ifoHome/publications/docbase/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2019/wp-cesifo-2019-04/12012019007623.html Verlag, kostenfrei, Volltext: http://www.cesifo-group.de/DocDL/cesifo1_wp7623.pdf 
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| Author Notes: | Zeno Enders, Franziska Hünnekes, Gernot J. Müller |
| Summary: | We assess how survey expectations impact production and pricing decisions on the basis of a large panel of German firms. We identify the causal effect of expectations by matching firms with the same fundamentals but different views about the future. The probability to raise (lower) production is 15 percentage points higher for optimistic (pessimistic) firms than for neutral firms. Optimistic firms are also more likely to raise prices. In a second step, we find optimism and pessimism to matter even if they turn out to be incorrect ex-post. Lastly, we quantify the contribution of incorrect optimism and pessimism to aggregate fluctuations. |
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| Physical Description: | Online Resource |