Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/249592 
Year of Publication: 
2021
Series/Report no.: 
Bank of Finland Research Discussion Papers No. 12/2021
Publisher: 
Bank of Finland, Helsinki
Abstract: 
Many consumers below the top of the distribution of a representative population by cognitive abilities barely react to monetary and fiscal policies that aim to stimulate consumption and borrowing, even when they are financially unconstrained and despite substantial debt capacity. Differences in income, formal education levels, economic expectations, and a large set of registry-based demographics do not explain these facts. Heterogeneous cognitive abilities thus act as human frictions in the transmission of economic policies that operate through the household sector and might imply redistribution from low- to high-cognitiveability agents. We conclude by discussing how our findings inform the microfoundation of behavioral macroeconomic theory.
Subjects: 
Cognition
Behavioral Macroeconomics
Heterogeneous Agents
Fiscal and Monetary Policy
Beliefs
Redistribution
Inequality
Survey Data
Household Finance
JEL: 
D12
D84
D91
E21
E31
E32
E52
E65
Persistent Identifier of the first edition: 
ISBN: 
978-952-323-385-0
Document Type: 
Working Paper

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