Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/233024
Authors: 
Lautenbacher, Stefan
Year of Publication: 
2021
Series/Report no.: 
ifo Working Paper No. 349
Abstract: 
Based on a new survey question in a large and representative panel of German firms, this paper introduces a novel measure of managers' subjective uncertainty. I compare this measure of business uncertainty to respondents' business expectations and document a strong negative relationship. However, the link is much weaker in bad times, since uncertainty is then persistently high - even when expectations are favorable. I continue by investigating the relative importance of uncertainty and expectations for corporate decisions. Exploiting information on firms' investment and labor reactions to the COVID-19 crisis, I do not find evidence that uncertainty induced "wait and see" behavior. However, a deterioration in managers' expectations and in their assessment of their firms' business situation predicts investment deferral and a reduction in employment.
Subjects: 
subjective uncertainty
expectations
firms
survey data
corporatedecisions
business cycles
JEL: 
C83
D22
D84
E32
E71
Document Type: 
Working Paper

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