New Survey of Firms' Expectations

National Bureau Of Economic Research Inc, Cambridge MA

Investigators

Abstract

This award funds work that will develop and and demonstrate a new survey of firms? expectations about the overall economy. Macroeconomists have long recognized that a firm's expectations about the future state of the economy has an important effect on its decisions about employment, investment, wages, and prices. Current research has developed theories of how firms form these expectations. The PIs propose to survey a representative sample of US firms over time, with the goal of tracking participant firms' expecations. The results will allow researchers to test theories about these expectations in a scientific way. In addition, the survey results may be directly relevant to policymakers in the Federal government, who would benefit from more precise real-time measurement of macroeconomic uncertainty faced by firms. The project therefore advances the progress of science through providing evidence that can be used to test theory, and will also advance the national prosperity if the results prove useful for macroeconomic policy decisions. The project will enhance our understanding of how firms form their expectations and how these expectations affect and reflect business cycles. The data can be used to test theories about whether or not firms' expectations are anchored, how attentive forms are to macroeconomic versus microeconomic developments, the determinants of inattention at the level of the firm, the nature of higher-order expectation, and the extent to which financial and other constraints affect firm decision-making.