The Effects of Producers’ Expectations on Output Variations in EU-Countries

Tobias F. Rötheli

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.

 


Full Text: PDF DOI: 10.5539/ijef.v6n4p1

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This work is licensed under a Creative Commons Attribution 3.0 License.

International Journal of Economics and Finance  ISSN  1916-971X (Print) ISSN  1916-9728 (Online)

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