Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/252003 
Year of Publication: 
2021
Series/Report no.: 
CESifo Working Paper No. 9486
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
Macroeconomic uncertainty affects the subjective distribution of individual expectations. Using four panel datasets, we document the effects of macro uncertainty on the mean expectation (first moment) and subjective uncertainty (second moment) of income forecasts. We find that macro uncertainty reduces the mean expectation of income when using professional forecasters' data as most macroeconomic models assume. However, macro uncertainty does not have a monotonic effect on subjective uncertainty. This finding is at odds with most models, which assume higher individual subjective uncertainty as the microfoundation for the impact of uncertainty on decision-making.
Subjects: 
macroeconomic uncertainty
subjective uncertainty
JEL: 
D80
D90
E70
Document Type: 
Working Paper
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