Expectations Uncertainty and Household Economic Behavior
Fisher College of Business Working Paper No. 2018-03-025
Charles A. Dice Center Working Paper No. 20018-25
Proceedings of Paris December 2020 Finance Meeting EUROFIDAI - ESSEC
Kenan Institute of Private Enterprise Research Paper No. 19-3
64 Pages Posted: 13 Dec 2018 Last revised: 13 Oct 2020
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Expectations Uncertainty and Household Economic Behavior
Expectations Uncertainty and Household Economic Behavior
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: Suggested Citation