Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/198983 
Year of Publication: 
2019
Series/Report no.: 
CESifo Working Paper No. 7623
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
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.
JEL: 
E32
D84
E71
Document Type: 
Working Paper
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