This website uses cookies.

By clicking the "Accept" button or continuing to browse our site, you agree to first-party and session-only cookies being stored on your device to enhance site navigation and analyze site performance and traffic. For more information on our use of cookies, please see our Privacy Policy.

« Back to Results

Macroeconomics and Consumer Surveys

Paper Session

Sunday, Jan. 6, 2019 8:00 AM - 10:00 AM

Atlanta Marriott Marquis, International 8
Hosted By: American Economic Association
  • Chair: Wilbert van der Klaauw, Federal Reserve Bank of New York

Survey Expectations and Stock Price Theories

Klaus Adam
,
University of Oxford
Dmitry Matveev
,
Bank of Canada
Stefan Nagel
,
University of Chicago

Abstract

Motivated by the observation that survey expectations are inconsistent with the notion that stock investors hold rational return expectations, we investigate whether alternative expectations hypotheses entertained in the asset pricing literature are consistent with the survey evidence. We empirically test (1) the notion that survey forecasts constitute rational but risk-neutral forecasts of future returns, and (2) the notion that survey forecasts are ambiguity averse/robust forecasts of future returns. We find that these alternative hypotheses are also strongly rejected by the data, albeit for different reasons. Hypothesis (1) is rejected because survey return forecasts are not in line with risk-free interest rates and because survey excess returns are predictable. Hypothesis (2) is rejected because agents are not always pessimistic about future returns, instead often display overly optimistic return expectations. We speculate as to what kind of expectations theories might be consistent with the available survey evidence.

Expectations with Endogenous Information Acquisition: An Experimental Investigation

Andreas Fuster
,
Swiss National Bank
Ricardo Perez-Truglia
,
University of California-Los Angeles
Basit Zafar
,
Arizona State University
Mirko Wiederholt
,
Sciences Po

Abstract

Information frictions play an important role in many theories of expectation formation and macroeconomic fluctuations. We use a survey experiment to generate direct evidence on how people acquire and process information, in the context of national home price expectations. Participants can buy different pieces of information that could be relevant for the formation of their expectations about the future median national home price. We use an incentive-compatible mechanism to elicit their maximum willingness to pay. We also introduce exogenous variation in the value of information by randomly assigning individuals to rewards for the ex-post accuracy of their expectations. Consistent with rational inattention, individuals are willing to pay more for information when they stand to gain more from it. However, underscoring the importance of limits on information processing capacity, individuals disagree on which signal they prefer to buy. Individuals with lower education and numeracy are less likely to demand information that has ex-ante higher predictive power. As a result of the disagreement, lowering the information acquisition cost does not decrease the cross-sectional dispersion of expectations. We show that a model with rational inattention and heterogeneous prior beliefs about information sources can match almost all of our empirical results. Our findings also have implications for the design of information interventions.

Inflation Expectations, Consumption and the Lower Bound: Micro Evidence from a Large Euro Area Survey

Ioana Duca
,
European Central Bank
Geoff Kenny
,
European Central Bank
Andreas Reuter
,
European Commission

Abstract

This paper exploits a very large multi-country survey of consumers to investigate empirically the relationship between inflation expectations and consumer spending. We document that for the Euro Area and almost all of its constituent countries this relationship is generally positive: a higher expected change in inflation is associated with an increase in the probability that a given consumer will make major purchases. Moreover, in line with the predictions of macroeconomic theory, the impact is stronger when the lower bound on nominal interest rates is binding. Also, using the estimated spending probabilities from our micro-level analysis, we indirectly estimate the impact of a gradual increase in inflation expectations on aggregate private consumption. We find the effects to be economically relevant, especially when the lower bound is binding.

Monetary Policy Transmission to Consumer Financial Stress and Durable Consumption

Dimitris Georgarakos
,
European Central Bank
Konstantinos Tatsiramos
,
University of Luxembourg

Abstract

Using panel data from eighteen annual-waves of the UK BHPS, we examine the effects of monetary policy on households’ self-reported financial stress and durable spending. For identification, we exploit random variation of households’ interview dates with respect to the timing of interest rate changes. After accounting for household and month-of-interview-year fixed effects, we uncover significant heterogeneities in the way that monetary policy affects household groups that differ in housing and saving status. In particular, an increase in interest rates induces financial stress among mortgagors and renters, while it lessens financial stress of savers. We find symmetric effects on durable spending, mainly driven by hand-to-mouth mortgagors and younger renters who are likely home buyers.
Discussant(s)
Joachim Winter
,
Ludwig Maximilian University of Munich
Luigi Pistaferri
,
Stanford University
Ruediger Bachmann
,
University of Notre Dame
Dmitri Koustas
,
University of Berkley
JEL Classifications
  • E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy
  • D8 - Information, Knowledge, and Uncertainty