Josefina Cenzon, Bocconi University

"Credit Market Experiences and Macroeconomic Expectations: Evidence and Theory"

Abstract 

Using the NY Fed's Survey of Consumer Expectations, I document a rejection-acceptance belief gap in macroeconomic expectations: households overweight personal credit rejections when forecasting the macroeconomy. The gap follows a similarity gradient: largest for aggregate credit, then inflation, unemployment, and stocks, and is accompanied by systematic forecast errors, ruling out a pure information channel. A contextual, associative-recall model, in which salient rejections cue similar ''low'' states, organises these facts and predicts stronger effects among younger and lower-SES households and in adverse macro states. The data, together with a new survey measuring perceived similarity, confirm both the heterogeneity and the gradient. Embedding the mechanism in a consumption-saving framework and using survey microdata on planned durables, I show that belief-driven pessimism reduces planned durable spending, increases saving, and can amplify downturns.

For more information about Josefina Cenzon and her interesting work - link to her website.

Contact person: John V. Kramer