Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/183334
Authors: 
Carroll, Christopher D.
Crawley, Edmund
Slacalek, Jiri
Tokuoka, Kiichi
White, Matthew N.
Year of Publication: 
2018
Series/Report no.: 
ECB Working Paper 2152
Abstract: 
Macroeconomic models often invoke consumption "habits" to explain the substantial persistence of macroeconomic consumption growth. But a large literature has found no evidence of habits in the microeconomic 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 macroeconomy. 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.
Subjects: 
Consumption
Sticky Expectations
Habits
Inattention
Imperfect Information
JEL: 
D83
D84
E21
E32
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-3257-8
Document Type: 
Working Paper

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