Sticky Expectations and Consumption Dynamics
Christopher Carroll (),
Edmund Crawley (),
Jiri Slacalek (),
Kiichi Tokuoka () and
Matthew White ()
Working Papers from eSocialSciences
Macroeconomic models often invoke consumption â€œhabitsâ€ to explain the substantial persistence of aggregate consumption growth. But a large literature has found no evidence of habits in microeconomic datasets that measure the behavior of individual households. The paper shows that the apparent conflict can be explained by a model in which consumers have accurate knowledge of their personal circumstances but â€˜sticky expectationsâ€™ about the macroeconomy. In the model, the persistence of aggregate consumption growth reflects consumersâ€™ imperfect attention to aggregate shocks. The proposed degree of (macro) inattention has negligible utility costs, because aggregate shocks constitute only a tiny proportion of the uncertainty that consumers face.
Keywords: eSS; sticky expectations; microeconomic datasets; trade; correlation; trade model; spatial correlation; demand system; Ricardian theory; macroeconomic implications; Ricardoâ€™s insight; technology; macro counterfactuals; trade partners; self-trade shares; micro estimates; China; Canada; United States; real wages; consumers face. (search for similar items in EconPapers)
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Working Paper: Sticky expectations and consumption dynamics (2018)
Working Paper: Sticky Expectations and Consumption Dynamics (2018)
Working Paper: Sticky Expectations and Consumption Dynamics (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:ess:wpaper:id:12563
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