Firm expectations and economic activity

Arbeitspapier

We assess how survey expectations impact production and pricing decisions on the basis of a large panel of German firms. We identify the causal effect of expectations by matching firms with the same fundamentals but different views about the future. The probability to raise (lower) production is 15 percentage points higher for optimistic (pessimistic) firms than for neutral firms. Optimistic firms are also more likely to raise prices. In a second step, we find optimism and pessimism to matter even if they turn out to be incorrect ex-post. Lastly, we quantify the contribution of incorrect optimism and pessimism to aggregate fluctuations.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 7623

Classification and Topics

• Classification: Wirtschaft ; Business Fluctuations; Cycles ; Expectations; Speculations ; Macro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on the Macro Economy‡

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Enders, Zeno ; Hünnekes, Franziska ; Müller, Gernot
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2019

Further information

• Handle: http://hdl.handle.net/10419/198983
• Last update: 10.03.2025, 11:41 AM CET