Essays on Expectations and Uncertainty in Macroeconomics

This dissertation comprises four empirical chapters that investigate how expectations and beliefs shape macroeconomic outcomes for households and firms. In Chapter 1, we test whether the high salience of gasoline prices leads U.S. consumers to overweight gas‐price movements in their overall inflation forecasts. Using dynamic panel models on the University of Michigan’s Survey of Consumers (1980–2022) and the New York Fed’s Survey of Consumer Expectations (2013–22), we find that while gasoline forecasts enter positively and significantly, their quantitative weight is modest, undermining the hypothesis of large salience‐driven distortions. Chapter 2 measures product‐level inflation uncertainty for five CPI components (gasoline, food, rent, medical care, education) by classifying respondents into high‐ and low‐uncertainty types via a two‐component maximum‐likelihood mixture model applied to SCE data (2013–24). We construct monthly indices, show that food‐price uncertainty dominates aggregate inflation uncertainty (with gasoline rising post‐2020), and demonstrate that monetary policy surprises dampen both aggregate and food/gasoline uncertainty, whereas oil‐supply shocks have no significant effect. Chapter 3 addresses the puzzle of low pass‐through from inflation forecasts to nominal wage‐growth expectations. Leveraging SCE microdata, we show that it is subjective inflation uncertainty—rather than point forecasts—that drives wage‐growth expectations, especially among low‐income workers. A novel IV strategy exploiting rounding behavior in gasoline and food forecasts isolates exogenous variation, revealing a large, causal effect of uncertainty on anticipated wages. We further develop a bargaining model under risk in which risk‐averse workers demand a risk premium as inflation uncertainty rises, explaining both higher wage forecasts and the muted mean pass‐through documented in prior studies. Finally, Chapter 4 analyzes climate‐related investment intentions using a large UK‐firm survey, finding that over half of firms expect climate change to boost medium‐term investment—mainly in green energy switches and efficiency improvements financed internally—but that anticipated investment levels remain insufficient to meet the UK Net Zero Pathway targets. Together, these chapters advance our understanding of how salience, uncertainty, and behavioral biases in expectations formation influence inflation and wage dynamics and firm investment decisions.