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Please use this identifier to cite or link to this item: http://hdl.handle.net/2108/198

Title: A Behavioral model of consumption
Authors: Giamboni, Luigi
Waldmann, Robert
Keywords: behavioral economics
subjective expectations
rational expectations
consumption and saving
Issue Date: 14-Feb-2004
Publisher: CEIS
Series/Report no.: Quaderni CEIS; 202
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.
URI: http://hdl.handle.net/2108/198
Appears in Collections:Quaderni

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