Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/319216 
Year of Publication: 
2025
Series/Report no.: 
CESifo Working Paper No. 11848
Publisher: 
CESifo GmbH, Munich
Abstract: 
This paper examines novel survey evidence on firms’ beliefs about macroeconomic tail risk and their role in investment decisions. In a large survey of German firms, I elicit (i) the subjective probability of a severe macroeconomic downturn and (ii) firms’ exposure to such an event. I consistently find across different empirical approaches that a higher probability of a severe macroeconomic downturn substantially lowers investment, particularly for firms that report higher exposure to the event. I attribute less than half of the investment response to changes in firms' subjective first and second moments. In a quantitative heterogeneous firm model calibrated to match the survey evidence, firms' concern with tail risk makes fiscal policy particularly effective for stabilizing investment.
Subjects: 
macroeconomic tail risk
rare events
firm expectations
investment.
JEL: 
D84
E22
E32
G30
Document Type: 
Working Paper
Appears in Collections:

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.