Evaluating how predictable errors in expected income affect consumption
AbstractThis paper studies whether anomalies in consumption can be explained by a behavioral model in which agents make predictable errors in forecasting income. We use a micro-data set containing subjective expectations about future income. The paper shows that, the null hypothesis of rational expectations is rejected in favor of the behavioral model, since consumption responds to predictable forecast errors. On average agents who we predict are too pessimistic increase consumption after the predictable positive income shock. On average agents who are too optimistic reduce consumption.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 12939.
Date of creation: 10 May 2007
Date of revision:
Behavioral Economics; Subjective Expectations; Rational Expectations; Consumption and Saving;
Other versions of this item:
- Luigi Giamboni & Emanuele Millemaci & Robert J. Waldmann, 2013. "Evaluating how predictable errors in expected income affect consumption," Applied Economics, Taylor & Francis Journals, vol. 45(28), pages 4004-4021, October.
- D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
- D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
- D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
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Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- I am storing pdf's at google sites so you can see my research
by Robert in Robert's Stochastic Thoughts on 2009-03-16 11:09:00
- Albert Solé-Ollé & Elisabet Viladecans-Marsal, 2011. "Local spending and the housing boom," Working Papers 2011/27, Institut d'Economia de Barcelona (IEB).
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