Subjective Models of the Macroeconomy: Evidence From Experts and Representative Samples

Peter Andre, Carlo Pizzinelli (), Christopher Roth and Johannes Wohlfart ()
Additional contact information
Carlo Pizzinelli: IMF
Johannes Wohlfart: Department of Economics, University of Copenhagen, CEBI, CESifo, Danish Finance Institute

No 119, ECONtribute Discussion Papers Series from University of Bonn and University of Cologne, Germany

Abstract: We study people’s subjective models of the macroeconomy and shed light on their at-tentional foundations. To do so, we measure beliefs about the effects of macroeconomic shocks on unemployment and inflation, providing respondents with identical information about the parameters of the shocks and previous realizations of macroeconomic vari-ables. Within samples of both 6,500 US households and 1,500 experts, beliefs are widely dispersed, even about the directional effects of shocks, and there are large differences in average beliefs between households and experts. Part of this disagreement seems to arise from selective retrieval of different propagation channels of macroeconomic shocks. We confirm this mechanism causally by exogenously shifting households’ attention to ei-ther supply-side or demand-side channels. Moreover, households with different personal experiences recall different propagation channels of the shocks, while experts tend to re-call textbook models. Our findings offer a new perspective on the widely documented disagreement in macroeconomic expectations.

Keywords: Expectation Formation; Subjective Models; Associations; Thoughts; Attention; Experiences; Macroeconomic Shocks; Monetary Policy; Fiscal Policy. (search for similar items in EconPapers)
JEL-codes: D83 D84 E31 E52 E71 (search for similar items in EconPapers)
Pages: 150 pages
Date: 2021-10
New Economics Papers: this item is included in nep-lab and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (25)

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https://www.econtribute.de/RePEc/ajk/ajkdps/ECONtribute_119_2021.pdf First version, 2021 (application/pdf)

Related works:
Journal Article: Subjective Models of the Macroeconomy: Evidence From Experts and Representative Samples (2022)
Working Paper: Subjective Models of the Macroeconomy: Evidence from Experts and a Representative Sample (2021)
Working Paper: Subjective Models of the Macroeconomy: Evidence from Experts and Representative Samples (2019)
Working Paper: SUBJECTIVE MODELS OF THE MACROECONOMY: EVIDENCE FROM EXPERTS AND A REPRESENTATIVE SAMPLE (2019)
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