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Expectations Uncertainty and Household Economic Behavior

Author

Listed:
  • Itzhak Ben-David
  • Elyas Fermand
  • Camelia M. Kuhnen
  • Geng Li

Abstract

We show that there exists significant heterogeneity across US households in how uncertain they are in their expectations regarding personal and macroeconomic outcomes, and that uncertainty in expectations predicts households' choices. Individuals with lower income or education, more precarious finances, and living in counties with higher unemployment are more uncertain in their expectations regarding own-income growth, inflation, and national home price changes. People with more uncertain expectations, even accounting for their socioeconomic characteristics, exhibit more precaution in their consumption, credit, and investment behaviors.

Suggested Citation

  • Itzhak Ben-David & Elyas Fermand & Camelia M. Kuhnen & Geng Li, 2018. "Expectations Uncertainty and Household Economic Behavior," NBER Working Papers 25336, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:25336
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    More about this item

    JEL classification:

    • D1 - Microeconomics - - Household Behavior
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D15 - Microeconomics - - Household Behavior - - - Intertemporal Household Choice; Life Cycle Models and Saving
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G4 - Financial Economics - - Behavioral Finance
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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