Corona The pandemic has posed unprecedented challenges to society and the economy. What is...
Wirtschaft im Wandel
Wirtschaft im Wandel Die Zeitschrift „Wirtschaft im Wandel“ will eine breite...
MICROPROD Raising EU Productivity: Lessons from Improved Micro Data The goal...
Joint Economic Forecast
Joint Economic Forecast The joint economic forecast is an instrument for evaluating...
Financial Systems: The Anatomy of the Market Economy How the financial system is...
Macro Data Download
Macro Data Download On this page, you will find long time series of macroeconomic...
Centre for Evidence-based Policy Advice
Centre for Evidence-based Policy Advice (IWH-CEP) ...
Asymmetric Investment Responses to Firm-specific Forecast Errors
IWH Discussion Papers,
This paper analyses how firm-specific forecast errors derived from survey data of German manufacturing firms over 2007–2011 affect firms’ investment propensity. Understanding how forecast errors affect firm investment behaviour is key to mitigate economic downturns during and after crisis periods in which forecast errors tend to increase. Our findings reveal a negative impact of absolute forecast errors on investment. Strikingly, asymmetries arise depending on the size and direction of the forecast error. The investment propensity declines if the realised situation is worse than expected. However, firms do not adjust investment if the realised situation is better than expected suggesting that the uncertainty component of the forecast error counteracts positive effects of unexpectedly favorable business conditions. Given that the fraction of firms making positive forecast errors is higher after the peak of the recent financial crisis, this mechanism can be one explanation behind staggered economic growth and slow recovery following crises.
Integrated Assessment of Epidemic and Economic Dynamics
IWH Discussion Papers,
In this paper, a simple integrated model for the joint assessment of epidemic and economic dynamics is developed. The model can be used to discuss mitigation policies like shutdown and testing. Since epidemics cause output losses due to a reduced labor force, temporarily reducing economic activity in order to prevent future losses can be welfare enhancing. Mitigation policies help to keep the number of people requiring intensive medical care below the capacity of the health system. The optimal policy is a mixture of temporary partial shutdown and intensive testing and isolation of infectious persons for an extended period of time.