Uncertainty and Change: Survey Evidence of Firms’ Subjective Beliefs

Ruediger Bachmann, Kai Carstensen, Stefan Lautenbacher, Manuel Menkhoff and Martin Schneider

No 16689, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: This paper studies how managers plan under uncertainty. In a new panel survey of German manufacturing firms, we observe both forecasts of sales growth and a quantitative measure of subjective uncertainty. We show that subjective uncertainty reflects change experienced by firms: it is high when growth is either unusually low or unusually high. Subjective uncertainty is more than conditional volatility: while more volatile firms are typically more uncertain, experienced change alone increases uncertainty, consistent with a model of learning. Uncertainty over our sample is mostly idiosyncratic but varies substantially over time and leads managers to plan lower employment and prices.

Keywords: Expectation formation; Firms; Measurement; Subjective uncertainty; Survey data (search for similar items in EconPapers)
JEL-codes: C83 D22 E20 E23 (search for similar items in EconPapers)
Date: 2021-11
References: Add references at CitEc
Citations:

Downloads: (external link)
https://cepr.org/publications/DP16689 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:16689

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP16689

Access Statistics for this paper

More papers in CEPR Discussion Papers from Centre for Economic Policy Research 33 Great Sutton Street, London EC1V 0DX, UK.
Bibliographic data for series maintained by CEPR ().