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Uncertainty and Change: Survey Evidence of Firms' Subjective Beliefs

Author

Listed:
  • Rüdiger Bachmann
  • Kai Carstensen
  • Stefan Lautenbacher
  • Manuel Menkhoff
  • Martin Schneider

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.

Suggested Citation

  • Rüdiger Bachmann & Kai Carstensen & Stefan Lautenbacher & Manuel Menkhoff & Martin Schneider, 2026. "Uncertainty and Change: Survey Evidence of Firms' Subjective Beliefs," American Economic Review, American Economic Association, vol. 116(8), pages 2806-2849, August.
    • Handle: RePEc:aea:aecrev:v:116:y:2026:i:8:p:2806-49
    DOI: 10.1257/aer.20240056
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    More about this item

    JEL classification:

    • C83 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Survey Methods; Sampling Methods
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production

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