Effects of Macro Uncertainty on Mean Expectation and Subjective Uncertainty: Evidence from Households and Professional Forecasters

Giulia Piccillo and Poramapa Poonpakdee

No 9486, CESifo Working Paper Series from CESifo

Abstract: Macroeconomic uncertainty affects the subjective distribution of individual expectations. Using four panel datasets, we document the effects of macro uncertainty on the mean expectation (first moment) and subjective uncertainty (second moment) of income forecasts. We find that macro uncertainty reduces the mean expectation of income when using professional forecasters’ data as most macroeconomic models assume. However, macro uncertainty does not have a monotonic effect on subjective uncertainty. This finding is at odds with most models, which assume higher individual subjective uncertainty as the microfoundation for the impact of uncertainty on decision-making.

Keywords: macroeconomic uncertainty; subjective uncertainty (search for similar items in EconPapers)
JEL-codes: D80 D90 E70 (search for similar items in EconPapers)
Date: 2021
New Economics Papers: this item is included in nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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