Uncertainty Shocks, Adjustment Costs and Firm Beliefs: Evidence From a Representative Survey
Andreas Dibiasi (),
Heiner Mikosch () and
Samad Sarferaz ()
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Andreas Dibiasi: ETH Zurich, Switzerland
Samad Sarferaz: ETH Zurich, Switzerland
No 21-496, KOF Working papers from KOF Swiss Economic Institute, ETH Zurich
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 managersâ€™ expected investment, employment and production in the short and mid run. We collect novel direct firm-level mea- sures for different types of capital and labor adjustment costs. Adjustment costs vary strongly across sectors and types. They help explain firmsâ€™ reactions to the shock, which provides evidence for the relevance of real-options channels. We compare the findings to DSGE and VAR results.
Keywords: Uncertainty; Shock; Firms; Survey; Vignette; Expectations; Investment; Employment; Production (search for similar items in EconPapers)
JEL-codes: C83 D83 D84 E22 E23 E24 (search for similar items in EconPapers)
Pages: 67 pages
New Economics Papers: this item is included in nep-mac and nep-ore
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Persistent link: https://EconPapers.repec.org/RePEc:kof:wpskof:21-496
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