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 15, Working Papers from German Research Foundation's Priority Programme 1859 "Experience and Expectation. Historical Foundations of Economic Behaviour", Humboldt University Berlin

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 di erences 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
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Citations: View citations in EconPapers (14)

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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:zbw:pp1859:15

DOI: 10.18452/21402

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