Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/251036 
Year of Publication: 
2021
Series/Report no.: 
KOF Working Papers No. 496
Publisher: 
ETH Zurich, KOF Swiss Economic Institute, Zurich
Abstract: 
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 managers' expected investment, employment and production in the short and mid run. We collect novel direct firm-level measures for different types of capital and labor adjustment costs. Adjustment costs vary strongly across sectors and types. They help explain firms' reactions to the shock, which provides evidence for the relevance of real-options channels. We compare the findings to DSGE and VAR results.
Subjects: 
Uncertainty
Shock
Firms
Survey
Vignette
Expectations
Investment
Employment
Production
JEL: 
C83
D83
D84
E22
E23
E24
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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