Expectations Uncertainty and Household Economic Behavior
Charles A. Dice Center Working Paper No. 20018-25
64 Pages Posted: 13 Dec 2018 Last revised: 2 Jul 2019
Date Written: November 29, 2018
We show that there exists significant heterogeneity across U.S. households in how uncertain they are in their expectations regarding personal and macroeconomic outcomes, and that uncertainty in expectations predicts households' choices. Individuals with lower income or education, more precarious finances, and living in counties with higher unemployment are more uncertain in their expectations regarding own-income growth, inflation, and national home price changes. People with more uncertain expectations, even accounting for their socioeconomic characteristics, exhibit more precaution in their consumption, credit, and investment behaviors.
Keywords: uncertainty, expectations, precautionary behavior, consumption, credit, portfolio choice, socioeconomic status
JEL Classification: D14, D83, D84, G02, G11
Suggested Citation: Suggested Citation