Perceived Budget Constraint of the Government 

(with Dmitriy Sergeyev)

Abstract: We provide direct evidence on how the public expects the government to satisfy its intertemporal budget constraint. In a representative survey of U.S. households, respondents expect only 45% of government debt to be financed by future primary surpluses and 23% to be rolled over indefinitely without ever generating surpluses, as if sustained by a bubble. Experts perceive an even larger bubble (37%). Beliefs respond to fundamentals: at a debt-to-GDP ratio of 150%, the perceived bubble shrinks to 15%. A New Keynesian model calibrated to these beliefs implies a 13% larger government spending multiplier. 

Subjective Monetary Policy Rules

Job Market Paper - preliminary

Abstract: This paper studies how households expect the Federal Reserve to respond to inflation and whether these perceptions affect monetary policy’s ability to stabilize the economy. I elicit expected policy-rate paths in a survey following a hypothetical increase in inflation. While 56 percent anticipate tightening, 29 percent expect no response, and 14 percent expect easing. About two-thirds of paths are compatible with a smoothed Taylor rule, allowing me to construct representative perceived policy coefficients. Their average implies a weaker inflation response than many estimates in the literature. I embed the survey-based distribution in a New Keynesian model to quantify average misperception and disagreement across households. Under the benchmark calibration, survey-based beliefs amplify the inflation response to both demand and cost-push shocks by 31 percent relative to rational expectations. Disagreement accounts for roughly one-third of this amplification, while the dovish tail drives most of the total effect. The results suggest that monetary policy effectiveness depends not only on the rule implemented, but also on how households’ perceive it.