Research Discussion Papers, Bank of Finland
Household optimism and borrowing
() and Hanna Putkuri
Abstract: A unique Finnish household-level data from 1994 to 2009
allow us to measure how households’ financial expectations are related to
the subsequent outcomes. We use the difference between the two to measure
forecast errors and household optimism and link the errors to households’
borrowing behaviour. We find that households making greatest optimistic
forecast errors carry greater levels of debt and are most likely to suffer
from excessive debt loads (overindebtedness). They also are less attentive
to forecast errors than their pessimistic counterparts when forming their
expectations for a subsequent period.
Keywords: forecast errors; ex ante optimism; borrowing; (follow links to similar papers)
JEL-Codes: D03; D14; G02; (follow links to similar papers)
45 pages, May 8, 2012
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