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Jel Classification:D84 

Report
Determinants of college major choice: identification using an information experiment

This paper studies the determinants of college major choice using an experimentally generated panel of beliefs, obtained by providing students with information on the true population distribution of various major-specific characteristics. Students logically revise their beliefs in response to the information, and their subjective beliefs about future major choice are associated with beliefs about their own earnings and ability. We estimate a rich model of college major choice using the panel of beliefs data. While expected earnings and perceived ability are a significant determinant of major ...
Staff Reports , Paper 500

Report
Preferences and biases in educational choices and labor market expectations: shrinking the black box of gender

Standard observed characteristics explain only part of the differences between men and women in education choices and labor market trajectories. Using an experiment to derive students' levels of overconfidence, and preferences for competitiveness and risk, this paper investigates whether these behavioral biases and preferences explain gender differences in college major choices and expected future earnings. In a sample of high-ability undergraduates, we find that competitiveness and overconfidence, but not risk aversion, are systematically related with expectations about future earnings: ...
Staff Reports , Paper 627

Report
Information heterogeneity and intended college enrollment

Despite a robust college premium, college attendance rates in the United States have remained stagnant and exhibit a substantial socioeconomic gradient. We focus on information gaps? specifically, incomplete information about college benefits and costs?as a potential explanation for these patterns. In a nationally representative survey of U.S. household heads, we show that perceptions of college costs and benefits are severely and systematically biased: 74 percent of our respondents underestimate the true benefits of college (average earnings of a college graduate relative to a non-college ...
Staff Reports , Paper 685

Report
University choice: the role of expected earnings, non-pecuniary outcomes, and financial constraints

We investigate the determinants of students? university choice, with a focus on expected monetary returns, non-pecuniary factors enjoyed at school, and financial constraints, in the Pakistani context. To mitigate the identification problem concerning the separation of preferences, expectations, and markets constraints, we combine rich data on individual-specific subjective expectations about labor market and non-pecuniary outcomes, with direct measures of financial constraints and students? stated school choice both with and without financial constraints. Estimates from a life-cycle model ...
Staff Reports , Paper 683

Working Paper
Inflation Expectations and Risk Premia in Emerging Bond Markets: Evidence from Mexico

To study inflation expectations and associated risk premia in emerging bond markets, thispaper provides estimates for Mexico based on an arbitrage-free dynamic term structuremodel of nominal and real bond prices that accounts for their liquidity risk. In addition todocumenting the existence of large and time-varying liquidity premia in nominal and realbond prices that are only weakly correlated, the results indicate that long-term inflationexpectations in Mexico are well anchored close to the inflation target of the Bank ofMexico. Furthermore, Mexican inflation risk premia are larger and more ...
Working Paper Series , Paper 2021-08

Discussion Paper
Consumers Increasingly Expect Additional Government Support amid COVID-19 Pandemic

The New York Fed’s Center for Microeconomic Data released results today from its April 2020 SCE Public Policy Survey, which provides information on consumers' expectations regarding future changes to a wide range of fiscal and social insurance policies and the potential impact of these changes on their households. These data have been collected every four months since October 2015 as part of our Survey of Consumer Expectations (SCE). Given the ongoing COVID-19 pandemic, households face significant uncertainty about their personal situations and the general economic environment when forming ...
Liberty Street Economics , Paper 20200526b

Report
Fundamental disagreement

We use the term structure of disagreement of professional forecasters to document a novel set of facts: (1) forecasters disagree at all horizons, including the long run; (2) the term structure of disagreement differs markedly across variables: it is downward sloping for real output growth, relatively flat for inflation, and upward sloping for the federal funds rate; (3) disagreement is time-varying at all horizons, including the long run. These new facts present a challenge to benchmark models of expectation formation based on informational frictions. We show that these models require two ...
Staff Reports , Paper 655

Journal Article
Model Averaging and Persistent Disagreement

The authors consider the following scenario: Two agents construct models of an endogenous price process. One agent thinks the data are stationary, the other thinks the data are nonstationary. A policymaker combines forecasts from the two models using a recursive Bayesian model averaging procedure. The actual (but unknown) price process depends on the policymaker?s forecasts. The authors find that if the policymaker has complete faith in the stationary model, then beliefs and outcomes converge to the stationary rational expectations equilibrium. However, even a grain of doubt about ...
Review , Volume 99 , Issue 3 , Pages 279-294

Working Paper
Financial Contracting with Enforcement Externalities

We study the negative feedback loop between the aggregate default rate and the efficacy of enforcement in a model of debt-financed entrepreneurial activity. The novel feature of our model is that enforcement capacity is accumulated ex ante and thus subject to depletion ex post. We characterize the effect of shocks that deplete enforcement resources on the aggregate default rate and credit supply. In the model default decisions by entrepreneurs are strategic complements, leading to multiple equilibria. We propose a global game selection to overcome equilibrium indeterminacy and show how shocks ...
Working Papers , Paper 18-21

Report
Fiscal foundations of inflation: imperfect knowledge

This paper proposes a theory of the fiscal foundations of inflation based on imperfect knowledge and learning. The theory is similar in spirit to, but distinct from, unpleasant monetarist arithmetic and the fiscal theory of the price level. Because the assumption of imperfect knowledge breaks Ricardian equivalence, details of fiscal policy, such as the average scale and composition of the public debt, matter for inflation. As a result, fiscal policy constrains the efficacy of monetary policy. Heavily indebted economies with debt maturity structures observed in many countries require ...
Staff Reports , Paper 649

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