Abstract: How do households perceive and interpret complex dynamic relationships between macroeconomic variables? Using a rich panel of elicited subjective expectations from households across multiple countries, combined with various sources of exogenous variation, we document a robust positive response of inflation expectations to contractionary demand and supply shocks. While households consistently interpret oil shocks as stagflationary, contractionary monetary policy shocks fail to reduce inflation expectations. We explore the drivers of this surprising pattern. Despite heterogeneity in individual forecasts, expectations are strongly correlated in the cross-section. A clear factor structure emerges: two principal components-remarkably consistent across countries, demographic groups, and levels of financial literacy-explain a substantial share of the variance in expectations. These factors capture households' perceptions of the sources of macroeconomic fluctuations. The first, dominant factor reflects a broad aversion to inflation, while the second relates to perceived labor market dynamics and interest rate movements.

Finalist at the 2022 ECB Young Economist Prize

Presented at: Boston University, Collegio Carlo Alberto, Universidad Carlos III de Madrid, IE University, Federal Reserve Board, European Central Bank, Central Bank of Italy, Central Bank of Denmark, Central Bank of the Netherlands, Central Bank of Lithuania, 2022 Theories and Methods in Macroeconomics, Philadelphia FED Mortgage Market Research Conference, 2022 SAEe.

Abstract: I study why monetary policy affects euro area member states unevenly, focusing on three housing and mortgage market characteristics: homeownership rate, adjustable-rate mortgage share, and loan-to-value ratio. Using euro area data, I show that higher values are associated with stronger consumption and mortgage rate responses. A two-country New Keynesian currency-union model with household heterogeneity reproduces observed heterogeneity and isolates three channels—cash-flow, homeownership rate, and mortgage credit—the last dominating. A Portugal case study shows amplification arises when all features are high. Closing the gap with the euro area average would require cutting Portugal’s LTV to one-third of its current level.