Sticky Expectations and Consumption Dynamics

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

Working Papers from eSocialSciences

Abstract: Macroeconomic models often invoke consumption “habits†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 ‘sticky expectations’ about the macroeconomy. In the model, the persistence of aggregate consumption growth reflects consumers’ 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; Ricardo’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)
Date: 2018-03
Note: Institutional Papers
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

Downloads: (external link)
http://www.esocialsciences.org/Download/repecDownl ... AId=12563&fref=repec

Related works:
Journal Article: Sticky Expectations and Consumption Dynamics (2020)
Working Paper: Sticky expectations and consumption dynamics (2018)
Working Paper: Sticky Expectations and Consumption Dynamics (2018)
Working Paper: Sticky Expectations and Consumption Dynamics (2006)
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:ess:wpaper:id:12563

Access Statistics for this paper

More papers in Working Papers from eSocialSciences
Bibliographic data for series maintained by Padma Prakash ().