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How do expectations about the macroeconomy affect personal expectations and behavior?
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Roth, Christopher and Wohlfart , Johannes (2020) How do expectations about the macroeconomy affect personal expectations and behavior? Review of Economics and Statistics, 102 (4). pp. 731-748. doi:10.1162/rest_a_00867
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WRAP-How-Expectations-Macroeconomy-Personal-Roth-2019.pdf - Accepted Version - Requires a PDF viewer. Download (1623Kb) | Preview |
Official URL: https://doi.org/10.1162/rest_a_00867
Abstract
Using a representative online panel from the US, we examine how individuals' macroeconomic expectations causally affect their personal economic prospects and their behavior. To exogenously vary respondents' expectations, we provide them with different professional forecasts about the likelihood of a recession. Respondents update their macroeconomic outlook in response to the forecasts, extrapolate to expectations about their personal economic circumstances and adjust their consumption plans and stock purchases. Extrapolation to expectations about personal unemployment is driven by individuals with higher exposure to macroeconomic risk, consistent with macroeconomic models of imperfect information in which people are inattentive, but understand how the economy works.
| Item Type: | Journal Article | ||||||||
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| Subjects: | H Social Sciences > HB Economic Theory H Social Sciences > HD Industries. Land use. Labor > HD61 Risk Management Q Science > Q Science (General) |
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| Divisions: | Faculty of Social Sciences > Economics | ||||||||
| Library of Congress Subject Headings (LCSH): | Macroeconomics, Recessions, Risk management -- Econometric models, Uncertainty (Information theory) | ||||||||
| Journal or Publication Title: | Review of Economics and Statistics | ||||||||
| Publisher: | MIT Press | ||||||||
| ISSN: | 0034-6535 | ||||||||
| Official Date: | October 2020 | ||||||||
| Dates: |
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| Date of first compliant deposit: | 5 July 2019 | ||||||||
| Volume: | 102 | ||||||||
| Number: | 4 | ||||||||
| Page Range: | pp. 731-748 | ||||||||
| DOI: | 10.1162/rest_a_00867 | ||||||||
| Status: | Peer Reviewed | ||||||||
| Publication Status: | Published | ||||||||
| Publisher Statement: | Author’s final version, accepted for publication in Review of Economics and Statistics | ||||||||
| Access rights to Published version: | Restricted or Subscription Access | ||||||||
| Copyright Holders: | © 2019 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology | ||||||||
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