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Surveying business uncertainty

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  • Altig, David
  • Barrero, Jose Maria
  • Bloom, Nicholas
  • Davis, Steven J.
  • Meyer, Brent
  • Parker, Nicholas

Abstract

We elicit subjective probability distributions from business executives about their own-firm outcomes at a one-year look-ahead horizon. In terms of question design, our key innovation is to let survey respondents freely select support points and probabilities in five-point distributions over future sales growth, employment, and investment. In terms of data collection, we develop and field a new monthly panel Survey of Business Uncertainty. The SBU began in 2014 and now covers about 1,750 firms drawn from all 50 states, every major nonfarm industry, and a range of firm sizes. We find three key results. First, firm-level growth expectations are highly predictive of realized growth rates. Second, firm-level subjective uncertainty predicts the magnitudes of future forecast errors and future forecast revisions. Third, subjective uncertainty rises with the firm’s absolute growth rate in the previous year and with the magnitude of recent revisions to its expected growth rate. We aggregate over firm-level forecast distributions to construct monthly indices of business expectations (first moment) and uncertainty (second moment) for the U.S. private sector.

Suggested Citation

  • Altig, David & Barrero, Jose Maria & Bloom, Nicholas & Davis, Steven J. & Meyer, Brent & Parker, Nicholas, 2022. "Surveying business uncertainty," Journal of Econometrics, Elsevier, vol. 231(1), pages 282-303.
  • Handle: RePEc:eee:econom:v:231:y:2022:i:1:p:282-303
    DOI: 10.1016/j.jeconom.2020.03.021
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    More about this item

    Keywords

    Business expectations; Uncertainty; Subjective forecast distributions; Surveys;
    All these keywords.

    JEL classification:

    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • M2 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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