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Evidence on the links between household finances, expectations and emotional well being



Publishing details

Working Paper

Authors / Editors

Cocco J;Gomesz F;Lopes P

Publication Year



We use panel data and an instrumental variables approach to provide evidence that households who experience deteriorations in their finances become more pessimistic going forward and suffer from a reduction in emotional wellbeing. The negative impact on emotional wellbeing in turn leads to an increased probability of a further decline in financial situation. It also affects the nature of expectation errors: more depressed individuals are more likely to make forecasts that are too pessimistic. Our results contribute to the understanding of the drivers of household finances and expectations formation


Household finance; Psychological well-being; Experiences; Expectation errors


Working Paper

Available on ECCH


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