The tale of two expectations

This paper aims to shed some light on the way lay consumers forecast by comparing survey expectations on two different-but linked-fundamentals. Specifically, we study the central tendencies and cross-sectional dispersions of predictions on individual-level and aggregate income dynamics. The proposed joint analysis highlights several interesting outcomes. Agents' predictions on micro and macroeconomic evolutions do not drift apart despite (possibly composite) shocks have permanent effects on expectations. When shocks create a gap between the two expectations, in fact, individuals revise only forecasts about GDP dynamics. Otherwise stated, predictions on personal stances are much stickier. With respect to these latter, then, expectations on aggregate dynamics overreact to shocks and, amazingly from an objective standpoint, they are systematically bleaker. As per second moments evidence shows, in sharp contrast with the typical assumption maintained in the macroeconomic literature, that disagreement among agents is persistently high. Moreover, the comparison makes astonishingly clear that when predicting the same macro fundamental the consensus is even lower. Finally, our setting allows testing whether cross sectional disagreement and time series volatility in expectations are equal.