This paper studies whether anomalies in consumption can be explained by a behavioral model in which agents do not have rational expectations and make predictable errors in forecasting income. We use a micro-data set containing subjective expectations about future income. The paper shows that, the null hypotheses of rational expectations is rejected in favor of the behavioral model, as that consumption responds to predictable forecast errors. On average agents who we predict are too pessimistic increase consumption after the predictable positive income shock. On average agents who are too optimistic reduce consumption.

Waldmann, R., Giamboni, L. (2004). A Behavioral model of consumption.

A Behavioral model of consumption

WALDMANN, ROBERT;
2004-02-14

Abstract

This paper studies whether anomalies in consumption can be explained by a behavioral model in which agents do not have rational expectations and make predictable errors in forecasting income. We use a micro-data set containing subjective expectations about future income. The paper shows that, the null hypotheses of rational expectations is rejected in favor of the behavioral model, as that consumption responds to predictable forecast errors. On average agents who we predict are too pessimistic increase consumption after the predictable positive income shock. On average agents who are too optimistic reduce consumption.
Settore SECS-P/05 - Econometria
en
behavioral economics
subjective expectations
rational expectations
consumption and saving
Waldmann, R., Giamboni, L. (2004). A Behavioral model of consumption.
Waldmann, R; Giamboni, L
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/2108/198
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