Households’ Beliefs and the Macroeconomy

In recent years, macroeconomic policymaking has placed growing emphasis on expectations as a key transmission channel. Central banks and fiscal authorities increasingly design interventions—whether interest rate moves, stimulus packages, or communication strategies—under the assumption that households will anticipate, interpret, and react to policy in predictable ways. Yet, what do households actually believe about macroeconomic policy? And how do those beliefs shape their behavior? A growing literature has begun to examine how households form expectations, how accurate those expectations are, and whether belief heterogeneity matters for aggregate outcomes. Using survey and experimental data, researchers have documented systematic deviations from rational expectations and large dispersion in beliefs. However, relatively little is known about how people interpret specific macroeconomic shocks, what mental models they apply, and how these beliefs map into financial decisions such as saving, spending, and durable consumption. This dissertation addresses these questions by developing novel empirical tools to study the beliefs and behaviors of households. It contributes to a research agenda that embeds heterogeneity in both beliefs and actions as core features of macroeconomic analysis. To do so, the dissertation combines original survey experiments with rich background data on households. Across three chapters, I study (i) how households perceive canonical macroeconomic shocks, (ii) how belief formation varies across socioeconomic groups, and (iii) how expectations shape financial decisions and the transmission and distributional effects of policy. The analysis builds on nationally representative surveys from the Netherlands and the U.S., enriched with randomized information treatments, hypothetical vignettes, and elicitation tools that capture both expectations and behavioral intentions. The approach emphasizes belief formation under limited information, cognitive frictions, and heuristic reasoning, while accounting for heterogeneity in exposure, attention, and constraints. Chapter 1 studies whether households understand the effects of key macroeconomic shocks (monetary, oil, tax) and whether such understanding affects financial behavior. Most respondents deviate from textbook predictions, often seeing all shocks as both inflationary and recessionary. Only 1% provide theory-consistent answers across all shocks. Households with more accurate beliefs are more likely to adjust spending and saving. Chapter 2 (with Yuriy Gorodnichenko) explores how homeownership shapes attention to inflation and responsiveness. Homeowners are more aware of inflation and adjust durable consumption more than renters, who revise beliefs more but change behavior less. Homeownership emerges as a key axis of heterogeneity. Chapter 3 (with Alessia Russo, Eleonora Granziera, and Efrem Castelnuovo) examines the role of education. More educated respondents better grasp macroeconomic trade-offs and adjust both beliefs and behavior. They also rely more on formal information sources, while less educated individuals use informal or social media. Together, the chapters show that heterogeneity in beliefs matters for economic behavior and policy transmission. By embedding cognition, exposure, and behavior into macroeconomic analysis, this work contributes to more realistic and policy-relevant models.