This website uses cookies.

By clicking the "Accept" button or continuing to browse our site, you agree to first-party and session-only cookies being stored on your device to enhance site navigation and analyze site performance and traffic. For more information on our use of cookies, please see our Privacy Policy.

  1. Home
  2. Journals
  3. American Economic Review
  4. Forthcoming Articles
  5. Uncertainty and Change: Survey Evidence of Firms’ Subjective Beliefs

American Economic Review

ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)

Uncertainty and Change: Survey Evidence of Firms’ Subjective Beliefs

  • Rüdiger Bachmann
  • Kai Carstensen
  • Stefan Lautenbacher
  • Manuel Menkhoff
  • Martin Schneider
American Economic Review (Forthcoming)

Abstract

This paper studies how managers plan under uncertainty. In a new panel survey of German manufacturing firms, we observe both forecasts of sales growth and a quantitative measure of subjective uncertainty. We show that subjective uncertainty reflects change experienced by firms: it is high when growth is either unusually low or unusually high. Subjective uncertainty is more than conditional volatility: while more volatile firms are typically more uncertain, experienced change alone increases uncertainty, consistent with a model of learning. Uncertainty over our sample is mostly idiosyncratic but varies substantially over time and leads managers to plan lower employment and prices.

Downloads