TY - UNPB
T1 - How Do Expectations about the Macroeconomy Affect Personal Expectations and Behavior?
AU - Roth, Christopher
AU - Wohlfart, Johannes
PY - 2017/8/10
Y1 - 2017/8/10
N2 - 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.
AB - 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.
KW - Expectation Formation
KW - Information
KW - Updating
KW - Aggregate Uncertainty
KW - Macroeconomic Conditions
U2 - 10.2139/ssrn.3016052
DO - 10.2139/ssrn.3016052
M3 - Working paper
BT - How Do Expectations about the Macroeconomy Affect Personal Expectations and Behavior?
ER -
