Local Information and Firm Expectations about Aggregates

Arbeitspapier

Using new survey data on quantitative growth expectations of firms in Germany, we show that firms resort to local information when forming expectations about aggregate growth. Firms extrapolate from the economic situation in their county, industry growth and their individual business situation. The effect is particularly strong for small firms and explains part of the high expectation dispersion across firms. Furthermore, we show that growth expectations are correlated with employment and investment decisions of firms, highlighting that differences in expectations do indeed seem to lead to differences in actual firm decisions. Our results confirm predictions of theoretical models with rational inattention.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 9826

Classification and Topics

• Classification: Wirtschaft ; Expectations; Speculations ; Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy: General (includes Measurement and Data) ; Business Fluctuations; Cycles
• Subject: GDP expectations ; expectation heterogeneity ; disagreement ; rational inattention ; ifo business tendency survey

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Dovern, Jonas ; Müller, Lena Sophia ; Wohlrabe, Klaus
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2022

Further information

• Handle: http://hdl.handle.net/10419/263756
• Last update: 10.03.2025, 11:41 AM CET