Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/263756 
Year of Publication: 
2022
Series/Report no.: 
CESifo Working Paper No. 9826
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
Using new survey data on quantitative growth expectations of firms in Germany, we show that firms resort to local information when forming expectations about aggregate growth. Firms extrapolate from the economic situation in their county, industry growth and their individual business situation. The effect is particularly strong for small firms and explains part of the high expectation dispersion across firms. Furthermore, we show that growth expectations are correlated with employment and investment decisions of firms, highlighting that differences in expectations do indeed seem to lead to differences in actual firm decisions. Our results confirm predictions of theoretical models with rational inattention.
Subjects: 
GDP expectations
expectation heterogeneity
disagreement
rational inattention
ifo business tendency survey
JEL: 
D84
E20
E32
Document Type: 
Working Paper
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