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Lay people’s models of the economy: A study based on surveys of consumer sentiments

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  • Dixon, R.
  • Griffiths, W.
  • Lim, G.C.

Abstract

The purpose of this paper is to use a large data set comprising individual’s responses to survey questions about future economic conditions, unemployment and prices to explore lay people’s models of the economy and specifically their understanding of the relationship between unemployment and economic activity and also between unemployment and prices. The data is taken from the questionnaires used to form monthly indexes of consumer sentiments in Australia. We ask if the implied bivariate relationships are rational in the sense used by Muth (1961) and if they are consistent with the good-begets-good heuristic proposed by Leiser and Aroch (2009). We also ask if they are consistent with the actual operation of economic – and especially monetary – policy in Australia. We find that the data does provide some support for these hypotheses and for recent work in behavioural macroeconomics utilising the good-begets-good heuristic.

Suggested Citation

  • Dixon, R. & Griffiths, W. & Lim, G.C., 2014. "Lay people’s models of the economy: A study based on surveys of consumer sentiments," Journal of Economic Psychology, Elsevier, vol. 44(C), pages 13-20.
    • Handle: RePEc:eee:joepsy:v:44:y:2014:i:c:p:13-20
    DOI: 10.1016/j.joep.2014.06.001
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    Cited by:

    1. Elisa Darriet & Sacha Bourgeois-Gironde, 2015. "Why lay social representations of the economy should count in economics," Mind & Society: Cognitive Studies in Economics and Social Sciences, Springer;Fondazione Rosselli, vol. 14(2), pages 245-258, November.
    2. van Giesen, Roxanne I. & Pieters, Rik, 2019. "Climbing out of an economic crisis: A cycle of consumer sentiment and personal stress," Journal of Economic Psychology, Elsevier, vol. 70(C), pages 109-124.

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    More about this item

    Keywords

    Consumer sentiments survey; Good-begets-good heuristic; Behavioural macroeconomics;
    All these keywords.

    JEL classification:

    • D1 - Microeconomics - - Household Behavior

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