Heterogeneity in macroeconomic expectations: the role of individual historical experiences, local conditions, and socio-economic characteristics

Prof. Dr. Christian Conrad, Heidelberg (Principal Investigator)

Prof. Dr. Jonas Dovern, Erlangen-Nürnberg (Principal Investigator)

Jun.-Prof. Dr. Fabian Krüger, Karlsruhe (Principal Investigator)

Lena Müller M.Sc., Erlangen-Nürnberg

Lora Pavlova M.Sc., Karlsruhe


Expectations are at the heart of modern macroeconomic theory. The commonly made assumptions of full information rational expectations or its recently proposed variants with information rigidities are simplistic and do not allow for genuine heterogeneity of expectations. In particular, they do not allow individual experiences of households or firms to affect their expectations of aggregate macroeconomic variables. Similarly, the role of individual experiences in the formation of financial expectations and decision-making is not yet well understood. This research project will provide empirical analyses based on survey data to enhance our understanding of how individual experiences of private households or firms influence their expectations. We will link information about subjects’ macroeconomic expectations with information about individual experiences, both in terms of their personal history (e.g., an individual becoming unemployed or a firm facing a severe drop in business activity) and in their local environment (e.g., the regional change in house prices). Furthermore, expectations can be related to individual characteristics, like, for instance, socio-demographic information or the size and sector of a firm. In particular, we will investigate which factors are relevant for explaining heterogeneity of expectations across private households or firms. In addition, we will contribute to the area of household finance that investigates the nexus between expectations and investment decisions. To make efficient use of the data, we will develop innovative econometric methods that are tailored to the analysis of survey-based expectations. In particular, these methods will allow us to analyse heterogeneity in probabilistic expectations (such as subjective probabilities for various possible inflation outcomes), in addition to traditional point expectations.



Conrad, C., Z. Enders, and A. Glas (2021). "The Role of Information and Experience for Households' Inflation Expectations.European Economic Review, 143, 104015.

Conrad, Christian/ Enders, Zeno/ Müller, Gernot: Die EZB setzt ihre Glaubwürdigkeit aufs Spiel, in: Ökonomenstimme (16 Dec. 2021). URL: https://www.oekonomenstimme.org/artikel/2021/12/die-ezb-setzt-ihre-glaubwuerdigkeit-aufs-spiel/