Household optimism and borrowing

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Title: Household optimism and borrowing
ISBN: 978-952-462-808-2
Author: Hyytinen, Ari ; Putkuri, Hanna
Organization: Bank of Finland
Series: Bank of Finland Research Discussion Papers
ISSN: 1456-6184
Series year: 2012
Series number: 21/2012
Year of publication: 2012
Publication date: 8.5.2012
Published in: Published in Journal of Money, Credit and Banking, Vol 50, Issue 1, February 2018: 55-76
Pages: 49 s.
Keywords: Suomi; velkaantuminen; kotitaloudet; asunnot; luotot; tulot; odotukset; ennusteet; virheet;
JEL: D21; L20
Abstract: A unique Finnish household-level data from 1994 to 2009 allow us to measure how households financial expectations are related to the sub- sequent 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 JEL: D21, L20 Key words: forecast errors, ex ante optimism, borrowing

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