The Propagation of Business Expectations within the European Union
40 Pages Posted: 7 Apr 2020
Date Written: 2020
This paper empirically investigates the propagation of fims' expectations within the European Union (EU). To this end, we combine EU-wide official business survey data with world input-output data. Econometrically, we model interdependencies in economic activities via input-output-linkages and apply space-time models with common factors. The resulting evidence provides indication for the existence of substantial spillovers in expectation formation. They are transmitted both upstream and downstream the European value chain, but the latter channel matters more.
Keywords: business expectation formation, propagation, input-output linkages, spillovers, space-time model
JEL Classification: C230, D840, E700, L140
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