Uncertainty and Change: Survey Evidence of Firms’ Subjective Beliefs

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

No 29430, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: C83 D22 E20 E23 (search for similar items in EconPapers)
Date: 2021-10
New Economics Papers: this item is included in nep-bec and nep-mac
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