Subjective Models of the Macroeconomy: Evidence From Experts and a Representative Sample

82 Pages Posted: 9 Dec 2019

See all articles by Johannes Wohlfart

Johannes Wohlfart

University of Copenhagen

Peter Andre

Leibniz Institute for Financial Research SAFE; Goethe University Frankfurt

Carlo Pizzinelli

International Monetary Fund (IMF)

Christopher Roth

University of Warwick, Faculty of Social Studies, Department of Economics, Students

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Date Written: November 20, 2019

Abstract

Using a sample of 2,200 households representative of the US population and a sample of more than 1,000 experts, we measure beliefs about how aggregate unemployment and ination respond to different macroeconomic shocks. Expert predictions are quantitatively close to standard DSGE models and VAR evidence. While households' beliefs are directionally aligned with those of experts in the case of oil supply shocks and government spending shocks, they predict an opposite reaction of ination to monetary policy and income tax shocks. A substantial fraction of deviations of household predictions can be explained by the use of a simple affective heuristic.

Keywords: Expectation Formation, Subjective Models, Heuristics, Macroeconomic Shocks, Monetary Policy, Fiscal Policy

JEL Classification: D83, D84, E31, E52, E71

Suggested Citation

Wohlfart, Johannes and Andre, Peter and Pizzinelli, Carlo and Roth, Christopher, Subjective Models of the Macroeconomy: Evidence From Experts and a Representative Sample (November 20, 2019). Available at SSRN: https://ssrn.com/abstract=3490654 or http://dx.doi.org/10.2139/ssrn.3490654

Johannes Wohlfart (Contact Author)

University of Copenhagen ( email )

Nørregade 10
Copenhagen, København DK-1165
Denmark

Peter Andre

Leibniz Institute for Financial Research SAFE ( email )

House of Finance
Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323
Germany

Goethe University Frankfurt

Grüneburgplatz 1
Frankfurt am Main, 60323
Germany

Carlo Pizzinelli

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Christopher Roth

University of Warwick, Faculty of Social Studies, Department of Economics, Students ( email )

Coventry, CV4 7AL
United Kingdom

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