Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/264530 
Year of Publication: 
2021
Citation: 
[Journal:] Economic Inquiry [ISSN:] 1465-7295 [Volume:] 60 [Issue:] 2 [Publisher:] Wiley Periodicals, Inc. [Place:] Hoboken, USA [Year:] 2021 [Pages:] 764-793
Publisher: 
Wiley Periodicals, Inc., Hoboken, USA
Abstract: 
This paper analyzes how firm‐specific forecast errors derived from survey data of German manufacturing firms over 2007–2011 relate to firms' investment propensity. Our findings reveal that asymmetries arise depending on the size and direction of the forecast error. The investment propensity declines if the realized situation is worse than expected. However, firms do not adjust investment if the realized situation is better than expected suggesting that the uncertainty component of the forecast error counteracts good surprises of unexpectedly favorable business conditions. This asymmetric mechanism can be one explanation behind slow recovery following crises.
Subjects: 
firm investment
forecast errors
microeconomic survey data
risk climate
uncertainty
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by-nc-nd Logo
Document Type: 
Article
Document Version: 
Published Version

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