Expectations and uncertainty: A common-source infection model for selected European countries

Luca Gerotto () and Antonio Paradiso ()
Additional contact information
Luca Gerotto: Department of Economics, University Of Venice CÃ Foscari

No 2017:29, Working Papers from Department of Economics, University of Venice "Ca' Foscari"

Abstract: We present a common-source infection model for explaining the formation of expectations by households. Starting from the framework of "Macroeconomic expectations of household and professional forecasters" (C.D. Carroll, The Quarterly Journal of Economics, 2003), we augment the original model assuming that also uninformed individuals are able to update expectations according to a naive econometric process. In this novel framework, a key role is played by the parameter measuring the probability of being informed: the dynamics of this factor over time capture the level of uncertainty perceived by households. This new framework is applied to study unemployment expectations for a selected group of European countries (France, Germany, Italy and the UK). Our results show that: (i) the novel framework is supported by data on unemployment expectations; and (ii) the probability of being informed is (negatively) correlated with the level of uncertainty spread by newspapers and conveyed by Internet.

Keywords: Expectations; Unemployment (search for similar items in EconPapers)
JEL-codes: D84 E24 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2017
New Economics Papers: this item is included in nep-eec, nep-mac and nep-upt
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.unive.it/web/fileadmin/user_upload/dip ... o_paradiso_29_17.pdf First version, anno (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ven:wpaper:2017:29

Access Statistics for this paper

More papers in Working Papers from Department of Economics, University of Venice "Ca' Foscari" Contact information at EDIRC.
Bibliographic data for series maintained by Sassano Sonia ().