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Government Spending and Individual’s Expectations. Evidence from Micro Data

CIIM Nicosia 21 Glafkou Kleride Avenue, Aglandjia

Research Seminar 15:30 pm, Friday, 25 May 2023 Fiscal policy has a significant impact on economic decisions, both at the individual and firm levels. Particularly, changes in taxation and government spending affect consumer spending, investment, job creation, and profitability. However, the impact of fiscal policy is still highly debatable, both from theoretical and empirical perspectives. In this paper, we focus  on individuals’ financial expectations and examine directly the impact of government spending changes on individual economic behaviour. We explore whether households form optimistic or pessimistic financial beliefs following changes in fiscal policy via welfare payments. We find evidence of the households' confidence  in the [...]