Expectations Uncertainty and Household Economic Behavior

64 Pages Posted: 13 Dec 2018 Last revised: 2 Jul 2019

See all articles by Elyas Fermand

Elyas Fermand

University of North Carolina (UNC) at Chapel Hill - Finance Area

Camelia M. Kuhnen

University of North Carolina Kenan-Flagler Business School & NBER

Geng Li

Federal Reserve Board

Itzhak Ben-David

Ohio State University (OSU) - Department of Finance; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: November 29, 2018

Abstract

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

Fermand, Elyas and Kuhnen, Camelia M. and Li, Geng and Ben-David, Itzhak, Expectations Uncertainty and Household Economic Behavior (November 29, 2018). Charles A. Dice Center Working Paper No. 20018-25; Kenan Institute of Private Enterprise Research Paper No. 19-3. Available at SSRN: https://ssrn.com/abstract=3293399 or http://dx.doi.org/10.2139/ssrn.3293399

Elyas Fermand

University of North Carolina (UNC) at Chapel Hill - Finance Area ( email )

Kenan-Flagler Business School
Chapel Hill, NC 27599-3490
United States

Camelia M. Kuhnen (Contact Author)

University of North Carolina Kenan-Flagler Business School & NBER ( email )

Kenan-Flagler Business School
Chapel Hill, NC 27599-3490
United States
(919) 9623284 (Phone)

HOME PAGE: http://public.kenan-flagler.unc.edu/faculty/kuhnenc/

Geng Li

Federal Reserve Board ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Itzhak Ben-David

Ohio State University (OSU) - Department of Finance ( email )

2100 Neil Avenue
Fisher 700D
Columbus, OH 43210-1144
United States
773 988 1353 (Phone)

HOME PAGE: http://fisher.osu.edu/fin/faculty/Ben-David/index.htm

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

HOME PAGE: http://fisher.osu.edu/fin/faculty/Ben-David/

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