Uncertainty Shocks, Adjustment Costs, and Firm Beliefs: Evidence from a Representative Survey

Andreas Dibiasi, Heiner Mikosch and Samad Sarferaz

American Economic Journal: Macroeconomics, 2025, vol. 17, issue 3, 36-73

Abstract: This paper studies the dynamic effects of an uncertainty shock on firm expectations. We conduct a survey that confronts managers from a representative firm sample with a model-consistent uncertainty shock scenario. An exogenous increase in uncertainty significantly reduces managers' expected investment, employment, and production in the short and mid run. We collect novel direct firm-level measures for different types of capital and labor adjustment costs. Adjustment costs vary strongly across types and sectors. They help explain firms' reactions to the shock, which provides evidence for the relevance of real options channels. We compare the findings to DSGE and VAR results.

JEL-codes: C83 D84 E22 E23 E24 G31 J23 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1257/mac.20220318

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