NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Expectations Uncertainty and Household Economic Behavior

Itzhak Ben-David, Elyas Fermand, Camelia M. Kuhnen, Geng Li

NBER Working Paper No. 25336
Issued in December 2018
NBER Program(s):Asset Pricing, Economic Fluctuations and Growth

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.

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Document Object Identifier (DOI): 10.3386/w25336

 
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