Handbook of Economic Expectations

Handbook of Economic Expectations

1st Edition - November 4, 2022

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  • Editors: Ruediger Bachmann, Giorgio Topa, Wilbert van der Klaauw
  • Paperback ISBN: 9780128229279
  • eBook ISBN: 9780128234761

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Description

Handbook of Economic Expectations discusses the state-of-the-art in the collection, study and use of expectations data in economics, including the modelling of expectations formation and updating, as well as open questions and directions for future research. The book spans a broad range of fields, approaches and applications using data on subjective expectations that allows us to make progress on fundamental questions around the formation and updating of expectations by economic agents and their information sets. The information included will help us study heterogeneity and potential biases in expectations and analyze impacts on behavior and decision-making under uncertainty.

Key Features

  • Combines information about the creation of economic expectations and their theories, applications and likely futures
  • Provides a comprehensive summary of economics expectations literature
  • Explores empirical and theoretical dimensions of expectations and their relevance to a wide array of subfields in economics

Readership

Upper-division undergraduates, graduate students, and researchers worldwide working in all fields of economics, including data collection, experimental economics, and applications of economic models

Table of Contents

  • Cover image
  • Title page
  • Table of Contents
  • Copyright
  • Contributors
  • Preface
  • Part 1: Expectation elicitation
  • Chapter 1: Household surveys and probabilistic questions
  • Abstract
  • 1.1. History and motivation for measuring household economic expectations
  • 1.2. Methodological considerations when developing surveys of expectations
  • 1.3. Insights and methodological advances
  • 1.4. Concluding remarks
  • References
  • Chapter 2: Firm surveys
  • Abstract
  • 2.1. Introduction
  • 2.2. Quantification of qualitative survey answers
  • 2.3. Historic business expectation surveys in the U.S.
  • 2.4. Ongoing business expectation surveys in the U.S.
  • 2.5. Firm surveys in Europe
  • 2.6. Firm surveys in Japan: the TANKAN
  • 2.7. International cooperation
  • 2.8. Conclusion
  • References
  • Chapter 3: Surveys of professionals
  • Abstract
  • 3.1. Surveys of professional forecasters
  • 3.2. Point and density forecasts: data features, measures, and properties
  • 3.3. Evaluation of forecaster performance
  • 3.4. Consistency of point and density forecasts
  • 3.5. Conclusion
  • Appendix 3.A. Appendix table: surveys of professional forecasters
  • References
  • Chapter 4: Survey experiments on economic expectations
  • Abstract
  • 4.1. Introduction
  • 4.2. Why (field) experiments on expectations?
  • 4.3. Information provision experiments
  • 4.4. Methodological issues
  • 4.5. Extensions and alternative approaches
  • 4.6. Directions for future work
  • References
  • Part 2: Expectations as data
  • Chapter 5: What do the data tell us about inflation expectations?
  • Abstract
  • 5.1. Introduction
  • 5.2. Data sources
  • 5.3. Stylized facts
  • 5.4. Determinants of inflation expectations
  • 5.5. Inflation expectations and economic choices
  • 5.6. Conclusion and outlook
  • References
  • Chapter 6: Housing market expectations
  • Abstract
  • 6.1. Measuring expectations
  • 6.2. Determinants of expectations and expectations heterogeneity
  • 6.3. The effects of expectations on individual housing market behavior
  • 6.4. House price expectations and aggregate economic outcomes
  • 6.5. Conclusion
  • References
  • Chapter 7: Expectations in education
  • Abstract
  • 7.1. Introduction
  • 7.2. Survey expectations about monetary outcomes of schooling
  • 7.3. Survey expectations about nonmonetary outcomes of schooling
  • 7.4. Analysis of schooling decisions with survey expectations
  • 7.5. Analysis of expectation formation and learning
  • 7.6. Conclusion
  • References
  • Chapter 8: Mortality and health expectations
  • Abstract
  • 8.1. Introduction
  • 8.2. Methods
  • 8.3. Survival expectations
  • 8.4. Health expectations
  • 8.5. Conclusion
  • Appendix 8.A. Estimation of a rounding model of survival expectations
  • Appendix 8.B. Additional tables
  • References
  • Chapter 9: Expectations in development economics
  • Abstract
  • 9.1. Introduction
  • 9.2. Measuring probabilistic expectations in surveys in developing countries
  • 9.3. Patterns of answers
  • 9.4. Applications
  • 9.5. Datasets
  • 9.6. Conclusions
  • References
  • Chapter 10: Retirement expectations
  • Abstract
  • 10.1. Introduction
  • 10.2. Theoretical framework
  • 10.3. Measuring retirement age expectations
  • 10.4. Eliciting a planned or expected retirement age
  • 10.5. Subjective retirement probability
  • 10.6. Predicting retirement: subjective probability predictions and predictive analytics
  • 10.7. Subjective work probability predictions among non-full-time worker respondents
  • 10.8. Research on the quality of retirement age expectations
  • 10.9. Potential uses of retirement age expectations
  • 10.10. Research with retirement age expectations as the left-hand-side variable
  • 10.11. Research with retirement age expectations as the right-hand-side variable
  • 10.12. Using conditional subjective work probability predictions to estimate effects on retirement
  • 10.13. Conclusions
  • References
  • Chapter 11: The macroeconomic expectations of firms
  • Abstract
  • 11.1. Introduction
  • 11.2. Surveys of firms' macroeconomic expectations
  • 11.3. Properties of firms' macroeconomic expectations
  • 11.4. Do firms' macroeconomic expectations matter?
  • 11.5. Conclusion
  • References
  • Chapter 12: Firm expectations about production and prices: facts, determinants, and effects
  • Abstract
  • 12.1. Introduction
  • 12.2. Surveying firm expectations
  • 12.3. Stylized facts
  • 12.4. Expectation formation
  • 12.5. Firm expectations and firm decisions
  • 12.6. Conclusion
  • References
  • Chapter 13: Expectations of financial market participants
  • Abstract
  • 13.1. Introduction
  • 13.2. Distinctions across surveys
  • 13.3. Examples of surveys of financial market participants
  • 13.4. Some advantages and uses of surveys
  • 13.5. Drawbacks of surveys
  • 13.6. Conclusion
  • References
  • Part 3: Expectations and economic theory
  • Chapter 14: Measuring market expectations
  • Abstract
  • 14.1. Introduction
  • 14.2. Market expectations and the price of risk
  • 14.3. Extracting measures of market expectations from asset prices
  • 14.4. Existing empirical evidence for selected markets
  • 14.5. Economic applications of market-based expectation measures
  • 14.6. Conclusions
  • References
  • Chapter 15: Inference on probabilistic surveys in macroeconomics with an application to the evolution of uncertainty in the survey of professional forecasters during the COVID pandemic
  • Abstract
  • 15.1. Introduction
  • 15.2. Inference on probabilistic surveys
  • 15.3. Challenges in measuring uncertainty
  • 15.4. Heterogeneity in density forecasts
  • 15.5. Pooling and consensus forecasts
  • 15.6. The evolution of professional forecasters' density forecasts during the COVID pandemic
  • 15.7. Conclusions
  • References
  • Chapter 16: Expectations data in asset pricing
  • Abstract
  • 16.1. Introduction
  • 16.2. A general asset pricing framework
  • 16.3. Empirical dynamics of investor expectations
  • 16.4. Mapping survey expectations into asset pricing models
  • 16.5. Models of expectations formation
  • 16.6. Future research directions
  • Appendix 16.A. Data sources for investor expectations
  • References
  • Chapter 17: The term structure of expectations
  • Abstract
  • 17.1. Introduction
  • 17.2. Joint behavior of short- and long-term forecasts
  • 17.3. Expectations and the term structure of interest rates
  • 17.4. The term structure of expectations in structural models
  • 17.5. Conclusions and further directions
  • References
  • Chapter 18: Expectational data in DSGE models
  • Abstract
  • 18.1. Introduction
  • 18.2. Expectational data in rational expectations DSGE models
  • 18.3. Expectational data and deviations from rational expectations
  • 18.4. Heterogeneity in survey expectations
  • 18.5. Issues and limitations
  • 18.6. Conclusions and future directions
  • References
  • Chapter 19: Expectations and incomplete markets
  • Abstract
  • 19.1. Introduction
  • 19.2. The general setup
  • 19.3. News shocks
  • 19.4. Channels underlying savings behavior
  • 19.5. Noise shocks
  • 19.6. Sunspots
  • 19.7. Conclusions
  • Appendix 19.A. Solutions for news shocks
  • Appendix 19.B. Computing the Jacobians
  • References
  • Chapter 20: Dampening general equilibrium: incomplete information and bounded rationality
  • Abstract
  • 20.1. Introduction
  • 20.2. Framework
  • 20.3. Incomplete information
  • 20.4. Bounded rationality
  • 20.5. Additional variants and dynamic extensions
  • 20.6. Applications
  • 20.7. Discussion: similarities, differences, and empirical backdrop
  • 20.8. Conclusion
  • References
  • Chapter 21: Expectations data in structural microeconomic models
  • Abstract
  • 21.1. Introduction
  • 21.2. A model
  • 21.3. Literature I: expectations over the states of nature
  • 21.4. Literature II: data on choice expectations
  • 21.5. Conclusion
  • References
  • Chapter 22: Expectations data, labor market, and job search
  • Abstract
  • 22.1. Introduction
  • 22.2. Measurement
  • 22.3. Illustrative framework
  • 22.4. Beliefs and behavior
  • 22.5. Beliefs and biases
  • 22.6. Beliefs and heterogeneity
  • 22.7. Conclusion
  • References
  • Part 4: Theories of expectations
  • Chapter 23: Bayesian learning
  • Abstract
  • 23.1. Introduction
  • 23.2. Mathematical preliminaries
  • 23.3. Using signals to understand economic activity
  • 23.4. Information choice and learning technologies
  • 23.5. Theories of the data economy
  • 23.6. Conclusion
  • References
  • Chapter 24: Ambiguity
  • Abstract
  • 24.1. Introduction
  • 24.2. Static choice under uncertainty
  • 24.3. Dynamic choice and equilibrium
  • 24.4. Quantifying ambiguity using survey data
  • 24.5. Aggregate applications
  • 24.6. Heterogeneity and micro-to-macro applications
  • 24.7. Policy implications
  • 24.8. Concluding remarks
  • References
  • Chapter 25: Epidemiological expectations
  • Abstract
  • 25.1. Introduction
  • 25.2. Background and motivation
  • 25.3. What insights can the epidemiological framework offer?
  • 25.4. Literature
  • 25.5. Conclusion
  • References
  • Part 5: Open issues
  • Chapter 26: Looking ahead to research enhancing measurement of expectations
  • Abstract
  • 26.1. Introduction
  • 26.2. Rounding reported probabilities
  • 26.3. Imprecise probabilities
  • 26.4. Studying expectations formation
  • 26.5. Confounding beliefs and preferences
  • 26.6. Conclusion
  • References
  • Index

Product details

  • No. of pages: 874
  • Language: English
  • Copyright: © Academic Press 2022
  • Published: November 4, 2022
  • Imprint: Academic Press
  • Paperback ISBN: 9780128229279
  • eBook ISBN: 9780128234761

About the Editors

Ruediger Bachmann

Rüdiger Bachmann is currently a Stepan Family Associate Professor (with tenure) of economics at the department of economics at the University of Notre Dame. At Notre Dame he is also a fellow of the Nanovic Institute for European Studies. He is a research affiliate with the Centre for Economic Policy Research (CEPR), a CESifo research network fellow and an external research professor at the ifo institute in Munich. Before joining the University of Notre Dame Bachmann was a full professor (W3) of behavioral economics and finance jointly at Goethe University and the Center of Excellence “Sustainable Architecture for Finance in Europe” (SAFE) in Frankfurt; the holder of the chair of economics, especially Macroeconomics (W3), at RWTH Aachen University; an assistant professor of economics at the University of Michigan; and a visiting (assistant) professor at the University of Pennsylvania, the University of Michigan, Harvard University and Boston University. Bachmann received undergraduate degrees in Economics and Philosophy from Mainz University, and a Ph.D. from Yale University in 2007. Bachmann also serves as an associate editor for the "Journal of Economic Dynamics and Control" and is a member of the macroeconomics committee of the German Economic Association.

Affiliations and Expertise

University of Notre Dame, Notre Dame, IN, USA

Giorgio Topa

Giorgio Topa is a Vice President in the Microeconomic Studies Function at the Federal Reserve Bank of New York. His primary research interests include applied microeconomics, labor economics and applied econometrics. He has been studying models of networks and social interactions, and associated econometric tools; mismatch in the labor market; job search behavior; consumer expectations and the elicitation of expectations in surveys. Prior to joining the New York Fed, Mr. Topa was an assistant professor at New York University. He holds a B.A. from Universita' di Venezia, Italy and a Ph.D. from the University of Chicago.

Affiliations and Expertise

Federal Reserve Bank of New York, New York, NY, USA

Wilbert van der Klaauw

Wilbert Van Der Klaauw is a Senior Vice President in the Microeconomic Studies Function and Director of the Center for Microeconomic Data at the Federal Reserve Bank of New York. He is a labor economist and applied econometrician whose research interests include the study of life cycle labor supply, household financial behavior and expectations, educational investment and productivity, and econometric approaches to program evaluation. He is co-editor of Labour Economics. Prior to joining the New York Fed, Dr. van der Klaauw was a Professor at UNC-Chapel Hill and Assistant Professor at New York University. He holds a Ph.D. from Brown University.

Affiliations and Expertise

Federal Reserve Bank of New York, New York, NY, USA

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