Uncertainty and Change: Survey Evidence of Firms' Subjective Beliefs

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

American Economic Review, 2026, vol. 116, issue 8, 2806-49

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: 2026
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DOI: 10.1257/aer.20240056

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