Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/248661 
Year of Publication: 
2021
Series/Report no.: 
ECONtribute Discussion Paper No. 119
Publisher: 
University of Bonn and University of Cologne, Reinhard Selten Institute (RSI), Bonn and Cologne
Abstract: 
We study people's subjective models of the macroeconomy and shed light on their at-tentional foundations. To do so, we measure beliefs about the effects of macroeconomic shocks on unemployment and inflation, providing respondents with identical information about the parameters of the shocks and previous realizations of macroeconomic vari-ables. Within samples of both 6,500 US households and 1,500 experts, beliefs are widely dispersed, even about the directional effects of shocks, and there are large differences in average beliefs between households and experts. Part of this disagreement seems to arise from selective retrieval of different propagation channels of macroeconomic shocks. We confirm this mechanism causally by exogenously shifting households' attention to ei-ther supply-side or demand-side channels. Moreover, households with different personal experiences recall different propagation channels of the shocks, while experts tend to re-call textbook models. Our findings offer a new perspective on the widely documented disagreement in macroeconomic expectations.
Subjects: 
Expectation Formation
Subjective Models
Associations
Thoughts
Attention
Experiences
Macroeconomic Shocks
Monetary Policy
Fiscal Policy
JEL: 
D83
D84
E31
E52
E71
Document Type: 
Working Paper

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