How Personality Traits Shape Inflation Expectations, Subjective Models of the Economy, and Choice

• Applicant: Professor Dr. Daniel Hoang
• Subject Area: Economic Theory ; Accounting and Finance ; Economic Policy, Applied Economics
• Term: since 2026
• Project identifier: Deutsche Forschungsgemeinschaft (DFG) - Project number 568054157

In this project, we aim to examine the effect of personality traits on the formation and updating of inflation expectations, subjective models/narratives of the economy, and economic decision-making. In the first module, we aim to understand if personality traits, i.e., agents’ “patterns of thoughts, feelings, and behaviors that reflect the tendency to respond in certain ways under certain circumstances” (Roberts, 2008), help explain the heterogeneous dynamics of inflation expectations across households using the post-COVID-19 inflation surge as an empirical laboratory. In the second module, we plan to assess if personality traits can represent a microfoundation for heterogeneous subjective models of the economy (see Andre et al., 2022), i.e., narratives about how economic variables are related to each other, which we elicit through customized surveys. Narratives serve as a social medium through which ideas can spread rapidly through conversation, and Shiller (2017) emphasizes their important role in the transmission of economic beliefs. In the third module, we aim to ask if personality traits can moderate the influence of exposure to economic tail events on subjective models and the persistent impact on inflation expectations. Under this channel, personality traits could cement subjective models and beliefs that households adopt at the time of adverse economic events, which hinders the impact of such events from dissipating over time as economic conditions evolve. To this aim, we will provide survey participants randomly with different narratives of the macroeconomy, on the basis of which monetary and fiscal policies are designed, as well as the prevailing narratives elicited in Module 2. The project exploits a unique survey infrastructure in Finland that allows us to merge proprietary data from (1) existing surveys, (2) own customized surveys and experiments, (3) administrative data, and (4) micro-level data on 12 personality and clinical traits as well as cognitive ability (IQ) for a large representative population. By observing – in principle – the entire population, we can directly measure the redistributive effects of economic shocks across different communities, offering valuable insights into more targeted policy measures that promote equitable distribution across subpopulations.

• DFG Programme: Research Grants
• International Connection: Finland, USA
• Cooperation Partners: Professor Francesco D' Acunto, Ph.D.; Dr. Maritta Paloviita; Professor Michael Weber, Ph.D.