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 Journal: Macroeconomics
  4. Forthcoming Articles
  5. Uncertainty Shocks, Adjustment Costs and Firm Beliefs: Evidence From a Representative Survey

American Economic Journal:
Macroeconomics

ISSN 1945-7707 (Print) | ISSN 1945-7715 (Online)

Uncertainty Shocks, Adjustment Costs and Firm Beliefs: Evidence From a Representative Survey

  • Andreas Diblasi
  • Heiner Mikosch
  • Samad Sarferaz
American Economic Journal: Macroeconomics (Forthcoming)

Abstract

This paper studies the dynamic effects of an uncertainty shock on firm expectations. We conduct a survey that confronts managers from a representative firm sample with a model-consistent uncertainty shock scenario. An exogenous increase in uncertainty significantly reduces managers' expected investment, employment and production in the short and mid run. We collect novel direct firm-level measures for different types of capital and labor adjustment costs. Adjustment costs vary strongly across types and sectors. They help explain firms' reactions to the shock, which provides evidence for the relevance of real-options channels. We com- pare the findings to DSGE and VAR results.

Downloads