The Effects of Producers’ Expectations on Output Variations in EU-Countries
Forthcoming in International Journal of Economics and Finance
14 Pages Posted: 20 Dec 2012 Last revised: 27 Jan 2014
Date Written: January 27, 2014
Abstract
This paper uses survey data from the 10 largest EU countries to investigate the role of producers’ expectations in the determination of aggregate output. For each country we define an output variable that captures the country’s deviation in terms of economic growth from the rest of the EU. A first round of estimates documents for each country the persistence of the deviation of its output growth relative to the growth in the rest of the EU. In a second round of estimates we make use of the survey data on expected output and show that this variable explains a significant part of the observed output differences. A further round of estimates adds selling price expectations as explanatory variables to the estimation. Finally, VAR models are estimated which allow an assessment of the quantitative effects of expectation shocks on aggregate production. Overall, our results support earlier and very recent findings from other studies suggesting the importance of variations in expectations as drivers of output variations.
Keywords: Producers’ expectations, survey data, EU countries
JEL Classification: E32, D84, F44
Suggested Citation: Suggested Citation
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