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Sticky expectations and consumption dynamics

Christopher Carroll (), Edmund Crawley, Jiri Slacalek (), Kiichi Tokuoka () and Matthew White ()

No 2152, Working Paper Series from European Central Bank

Abstract: Macroeconomic models often invoke consumption "habits" to explain the substantial persistence of macroeconomic consumption growth. to explain the substantial But a large literature has found no evidence of habits in the micro-economic datasets that measure the behavior of individual households. We show that the apparent conflict can be explained by a model in which consumers have accurate knowledge of their personal circumstances but `sticky expectations' about the macro-economy. In our model, the persistence of aggregate consumption growth reflects consumers' imperfect attention to aggregate shocks. Our proposed degree of (macro) inattention has negligible utility costs, because aggregate shocks constitute only a tiny proportion of the uncertainty that consumers face. JEL Classification: D83, D84, E21, E32

Keywords: consumption; habits; imperfect information; inattention; sticky expectations (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac
Date: 2018-05
Note: 1111765
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3) Track citations by RSS feed

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Related works:
Working Paper: Sticky Expectations and Consumption Dynamics (2018) Downloads
Working Paper: Sticky Expectations and Consumption Dynamics (2018) Downloads
Working Paper: Sticky Expectations and Consumption Dynamics (2006)
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