Surveying business uncertainty

David Altig, Jose Maria Barrero, Nicholas Bloom, Steven Davis, Brent Meyer and Nicholas Parker

Journal of Econometrics, 2022, vol. 231, issue 1, 282-303

Abstract: We elicit subjective probability distributions from business executives about their own-firm outcomes at a one-year look-ahead horizon. In terms of question design, our key innovation is to let survey respondents freely select support points and probabilities in five-point distributions over future sales growth, employment, and investment. In terms of data collection, we develop and field a new monthly panel Survey of Business Uncertainty. The SBU began in 2014 and now covers about 1,750 firms drawn from all 50 states, every major nonfarm industry, and a range of firm sizes. We find three key results. First, firm-level growth expectations are highly predictive of realized growth rates. Second, firm-level subjective uncertainty predicts the magnitudes of future forecast errors and future forecast revisions. Third, subjective uncertainty rises with the firm’s absolute growth rate in the previous year and with the magnitude of recent revisions to its expected growth rate. We aggregate over firm-level forecast distributions to construct monthly indices of business expectations (first moment) and uncertainty (second moment) for the U.S. private sector.

Keywords: Business expectations; Uncertainty; Subjective forecast distributions; Surveys (search for similar items in EconPapers)
JEL-codes: L2 M2 O32 O33 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (23)

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Related works:
Working Paper: Surveying Business Uncertainty (2020)
Working Paper: Surveying Business Uncertainty (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:econom:v:231:y:2022:i:1:p:282-303

DOI: 10.1016/j.jeconom.2020.03.021

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