Human frictions in the transmission of economic policy

Arbeitspapier

Many consumers below the top of the distribution of a representative population by cognitive abilities barely react to monetary and fiscal policies that aim to stimulate consumption and borrowing, even when they are financially unconstrained and despite substantial debt capacity. Differences in income, formal education levels, economic expectations, and a large set of registry-based demographics do not explain these facts. Heterogeneous cognitive abilities thus act as human frictions in the transmission of economic policies that operate through the household sector and might imply redistribution from low- to high-cognitiveability agents. We conclude by discussing how our findings inform the microfoundation of behavioral macroeconomic theory.

Object Details

• ISBN: 978-952-323-385-0
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Bank of Finland Research Discussion Papers ; No. 12/2021

Classification and Topics

• Classification: Wirtschaft ; Consumer Economics: Empirical Analysis ; Expectations; Speculations ; Micro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making‡ ; Macroeconomics: Consumption; Saving; Wealth ; Price Level; Inflation; Deflation ; Business Fluctuations; Cycles ; Monetary Policy ; Studies of Particular Policy Episodes
• Subject: Cognition ; Behavioral Macroeconomics ; Heterogeneous Agents ; Fiscal and Monetary Policy ; Beliefs ; Redistribution ; Inequality ; Survey Data ; Household Finance

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): D'Acunto, Francesco ; Hoang, Daniel ; Paloviita, Maritta ; Weber, Michael
• Event: Veröffentlichung
• (who): Bank of Finland
• (where): Helsinki
• (when): 2021

Further information

• Handle: http://hdl.handle.net/10419/249592
• Last update: 10.03.2025, 11:44 AM CET