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Local information and firm expectations about aggregates

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  • Dovern, Jonas
  • Müller, Lena Sophia
  • Wohlrabe, Klaus

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. Variables (fixed effects) measuring local signals account for up to 26 % (47 %) of the expectation dispersion across firms. The effect is particularly strong for small firms. Our results confirm predictions of theoretical models with rational inattention.

Suggested Citation

  • Dovern, Jonas & Müller, Lena Sophia & Wohlrabe, Klaus, 2023. "Local information and firm expectations about aggregates," Journal of Monetary Economics, Elsevier, vol. 138(C), pages 1-13.
    • Handle: RePEc:eee:moneco:v:138:y:2023:i:c:p:1-13
    DOI: 10.1016/j.jmoneco.2023.03.005
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    Cited by:

    1. Robert Lehmann, 2023. "The Forecasting Power of the ifo Business Survey," Journal of Business Cycle Research, Springer;Centre for International Research on Economic Tendency Surveys (CIRET), vol. 19(1), pages 43-94, March.

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    More about this item

    Keywords

    GDP expectations; Expectation heterogeneity; Disagreement; Rational inattention; ifo business tendency survey;
    All these keywords.

    JEL classification:

    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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