Comments on: “What Drives Aggregate Investment? Evidence from German Survey Data”


The broad question that motivates this paper is: Which shocks drive aggregate fluctuations? Narrative methods have been widely used in macroeconomics to help answer it. They involve obtaining information from qualitative data sources to identify the reason and/or the quantities associated with a particular change in a variable (Ramey, 2016). Often narrative methods refer to analyzing historical sources on macroeconomic policy decisions, such as fiscal or monetary policy announcements. However, they can also relate to the information contained in micro-level qualitative data sources, such as business surveys. For example, Guiso and Parigi (1999) use survey information on the subjective probability distribution of future demand to estimate firm-level uncertainty shocks. This paper follows a similar approach, in that it uses qualitative information from business surveys, and has two novel objectives: First, to use firm-level survey information to identify the aggregate shocks driving aggregate investment in the German manufacturing sector. Second, to identify the nature of these shocks. I think we learn a lot from the results the authors obtain pursuing the first objective. The analysis related to the second objective generates results that, while they do not provide definitive answers, raise interesting questions for future research.

Published as: Comments on: “What drives aggregate investment? Evidence from German survey data” in Journal of Economic Dynamics and Control , Vol. 115, June, 2020