TY  - UNPD
A1  - Massenot, Baptiste
A1  - Pettinicchi, Yuri
T1  - Can firms see into the future? Survey evidence from Germany
T2  - SAFE working paper series ; No. 187
N2  - This paper presents new evidence on the expectation formation process of firms from a survey of the German manufacturing sector. It focuses on the expectation about their future business conditions, which enters the widely followed economic sentiment index and which is an important determinant of their employment and investment decisions. We find that firms extrapolate their experience too much and make predictable forecasting errors. Moreover, firms do not seem to anticipate the upcoming reversals of business cycle peaks and troughs which causes suboptimal adjustment of investment and employment and affects their inventories and profits. However, the impact on expectation errors decreases with the size and the age of the firm as firms learn to reduce their extrapolation bias over time.
T3  - SAFE working paper - 187 
KW  - Expectation Formation
KW  - Expectation Error
KW  - Learning
KW  - Extrapolation
KW  - Experience
Y1  - 2017
UR  - http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/45106
UR  - https://nbn-resolving.org/urn:nbn:de:hebis:30:3-451066
UR  - https://ssrn.com/abstract=3071576
IS  - November 3, 2017
PB  - SAFE
CY  - Frankfurt am Main
ER  -