Firms' Optimism and Pessimism

Arbeitspapier

Are firms` expectations systematically too optimistic or too pessimistic? Does it matter? We use micro data from the West German manufacturing subset of the IFO Business Climate Survey to infer quarterly production changes at the firm level and combine them with production expectations over a quarterly horizon in the same survey to construct series of quantitative firm-specific expectation errors. We find that depending on the details of the empirical strategy at least 6 percent and at most 34 percent of firms systematically over- or underpredict their one-quarter-ahead upcoming production. In a simple neoclassical heterogeneous-firm model these expectational biases lead to factor misallocations that cause welfare losses which in the worst case are comparable to conventional estimates of the welfare costs of business cycles fluctuations. In more conservative calibrations the welfare losses are even smaller.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: CESifo Working Paper ; No. 4176

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Firm Behavior: Empirical Analysis ; Expectations; Speculations ; Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy: General (includes Measurement and Data) ; Investment; Capital; Intangible Capital; Capacity
• Thema: survey data ; expectation errors ; expectation biases ; optimism ; pessimism ; firm data ; heterogeneous firms

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Bachmann, Ruediger ; Elstner, Steffen
• Ereignis: Veröffentlichung
• (wer): Center for Economic Studies and ifo Institute (CESifo)
• (wo): Munich
• (wann): 2013

Weitere Informationen

• Handle: http://hdl.handle.net/10419/71170
• Letzte Aktualisierung: 10.03.2025, 11:43 MEZ