How Do Firms Form Expectations of Aggregate Growth? New Evidence from a Large-Scale Business Survey

Jonas Dovern, Lena Sophia Müller and Klaus Wohlrabe

No 8179, CESifo Working Paper Series from CESifo

Abstract: Expectations are highly relevant for macroeconomic dynamics. Yet, the empirical evidence about properties of corporate macroeconomic expectations is scarce. Using new survey data on quantitative growth expectations of firms in Germany, we show that expectations are highly dispersed. The degree of dispersion depends on firm size and on how important the general economy is for the business of firms, supporting theories of rational inattention. Firms seem to extrapolate from local economic conditions and business experiences to aggregate growth expectations. Differences in growth expectations are associated with differences in firms’ investment and labor demand.

Keywords: GDP expectations; expectation heterogeneity; firm; ifo business tendency survey (search for similar items in EconPapers)
JEL-codes: D84 E32 (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-bec, nep-eur and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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Working Paper: How Do Firms Form Expectations of Aggregate Growth? New Evidence from a Large-scale Business Survey (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_8179

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