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Household optimism and borrowing

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Author Info

  • Hyytinen, Ari

    ()
    (University of Jyväskylä and Yrjö Jahnsson Foundation)

  • Putkuri, Hanna

    ()
    (Bank of Finland)

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    Abstract

    A unique Finnish household-level data from 1994 to 2009 allow us to measure how households’ financial expectations are related to the subsequent outcomes. We use the difference between the two to measure forecast errors and household optimism and link the errors to households’ borrowing behaviour. We find that households making greatest optimistic forecast errors carry greater levels of debt and are most likely to suffer from excessive debt loads (overindebtedness). They also are less attentive to forecast errors than their pessimistic counterparts when forming their expectations for a subsequent period.

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    File URL: http://www.suomenpankki.fi/en/julkaisut/tutkimukset/keskustelualoitteet/Documents/BoF_DP_1221.pdf
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    Bibliographic Info

    Paper provided by Bank of Finland in its series Research Discussion Papers with number 21/2012.

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    Length: 45 pages
    Date of creation: 08 May 2012
    Date of revision:
    Handle: RePEc:hhs:bofrdp:2012_021

    Contact details of provider:
    Postal: Bank of Finland, P.O. Box 160, FI-00101 Helsinki, Finland
    Web page: http://www.suomenpankki.fi/en/
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    Related research

    Keywords: forecast errors; ex ante optimism; borrowing;

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    References

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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Optimism and debt overload
      by Economic Logician in Economic Logic on 2012-06-19 14:42:00
    2. [経済]サラ金地獄への道は楽観で敷き詰められている
      by himaginary in himaginaryの日記 on 2012-06-21 07:00:00
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    Cited by:
    1. Hyytinen , Ari & Lahtonen, Jukka & Pajarinen, Mika, 2012. "Entrepreneurial optimism and survival," Research Discussion Papers 20/2012, Bank of Finland.

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