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Household optimism and borrowing

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  • Hyytinen, Ari
  • Putkuri, Hanna

Abstract

A unique Finnish household-level data from 1994 to 2009 allow us to measure how households financial expectations are related to the sub- sequent 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

Suggested Citation

  • Hyytinen, Ari & Putkuri, Hanna, 2012. "Household optimism and borrowing," Bank of Finland Research Discussion Papers 21/2012, Bank of Finland.
    • Handle: RePEc:zbw:bofrdp:rdp2012_021
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    Cited by:

    1. Hyytinen, Ari & Lahtonen, Jukka & Pajarinen, Mika, 2012. "Entrepreneurial optimism and survival," Bank of Finland Research Discussion Papers 20/2012, Bank of Finland.

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    More about this item

    Keywords

    forecast errors; ex ante optimism; borrowing;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General

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