Job Market Paper

The Devil is in the Tail: Macroeconomic Tail Risk Expectations of Firms

This paper examines novel survey evidence on firms’ beliefs about macroeconomic tail risk and their role in investment decisions. In a large survey of German firms, I elicit (i) the subjective probability of a severe macroeconomic downturn and (ii) firms’ exposure to such an event. I consistently find across different empirical approaches that a higher probability of a severe macroeconomic downturn substantially lowers investment, particularly for firms that report higher exposure to the event. I attribute less than half of the investment response to changes in firms' subjective first and second moments. In a quantitative heterogeneous firm model calibrated to match the survey evidence, firms' concern with tail risk makes fiscal policy particularly effective for stabilizing investment.

Other Working Papers

Uncertainty and Change: Survey Evidence of Firms' Subjective Beliefs (with Rüdiger Bachmann, Kai Carstensen, Stefan Lautenbacher and Martin Schneider)
Revise and Resubmit at American Economic Review

Firms’ Pass-Through Dynamics: A Survey Approach (with Isabel Gödl-Hanisch), CEPR DP, Policy Brief: ifo SD, Twitter Thread
Revise and Resubmit at Journal of Political Economy Macroeconomics

Firm Expectations and News: Micro v Macro (with Benjamin Born, Zeno Enders, Gernot J. Müller and Knut Niemann), CEPR DP, Policy Briefs: VoxEU, Twitter Thread  

Publications

Downward Revision of Investment Decisions after Corporate Tax Hikes (with Sebastian Link, Andreas Peichl and Paul Schüle), Policy Briefs: EconPol, Cato, Twitter Thread, American Economic Journal: Economic Policy, 2024, 16(4): 194–222.

Demand or Supply? Price Adjustment Heterogeneity during the Covid-19 Pandemic (with Almut Balleer, Sebastian Link and Peter Zorn), pdf, Policy Briefs: VoxEU, ifo SD, International Journal of Central Banking, 2024, 20(1): 93-158. 

Work in Progress

Firm Expectations and Uncertainty in Normal Times and Times of Crisis (with Rüdiger Bachmann, Kai Carstensen and Martin Schneider)

The Impact of Interest: Firms' Investment Sensitivity to Interest Rates (with Lea Best and Benjamin Born)

Policy Briefs (selected)

Wie passen Unternehmen ihre Investitionen an die gestiegenen Zinsen an? (with Lea Best and Benjamin Born), ifo Schnelldienst digital, Vol. 5(3), 01-04, 2024.

Inwieweit geben Unternehmen die gestiegenen Einkaufspreise an ihre Kunden weiter? (with Isabel Gödl-Hanisch), ifo Schnelldienst, Vol. 75(12), 32-34, 2022.  

Umsatzunsicherheit und Umsatzerwartungen deutscher Firmen zur Zeit des Ukraine-Kriegs: Gas und Gasausfall spielen eine eher geringe Rolle (with Rüdiger Bachmann, Kai Carstensen and Martin Schneider), ifo Schnelldienst, Vol. 75(6), 33-36, 2022. 

The EU’s Social Connectedness to Ukraine and Its Implications for the Distribution of Ukrainian Refugees (with Lea Best), CESifo Forum, Vol. 23(4), 17-20, 2022. ifo SD (German)

Several contributions to the ifo economic forecasts (with firm-level data analysis), e.g. ifo Konjunkturprognose Sommer 2022: Inflation, Lieferengpässe und Krieg bremsen wirtschaftliche Erholung in Deutschland, ifo Schnelldienst, 2022, Vol. 75(Sonderausgabe Juni), 01-53, 2022.