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Household optimism and borrowing

Author

Listed:
  • 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 JEL: D21, L20 Key words: forecast errors, ex ante optimism, borrowing

Suggested Citation

  • Hyytinen, Ari & Putkuri, Hanna, 2012. "Household optimism and borrowing," Research Discussion Papers 21/2012, Bank of Finland.
  • Handle: RePEc:bof:bofrdp:2012_021
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    File URL: https://helda.helsinki.fi/bof/bitstream/123456789/7569/1/170301.pdf
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    References listed on IDEAS

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    Cited by:

    1. Jonathan Zinman, 2014. "Household Debt: Facts, Puzzles, Theories, and Policies," NBER Working Papers 20496, National Bureau of Economic Research, Inc.
    2. Hyytinen, Ari & Lahtonen, Jukka & Pajarinen, Mika, 2012. "Entrepreneurial optimism and survival," Research Discussion Papers 20/2012, Bank of Finland.
    3. Levy, Matthew R. & Tasoff, Joshua, 2017. "Exponential-growth bias and overconfidence," Journal of Economic Psychology, Elsevier, vol. 58(C), pages 1-14.

    More about this item

    JEL classification:

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

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