IQ, Expectations and Choice

Abstract We use administrative and survey-based micro data to study the relationship between cognitive abilities (IQ), formation of inflation expectations, consumption plans a representative male population. High-IQ men display 50$\%$ lower forecast errors for than other men. men, but not others, have consistent expectations perceptions over time. In terms choice, only high-IQ increase their propensity when expecting higher as consumer Euler equation prescribes. Education levels, income, socio-economic status, although important, do explain variation in choice by IQ. Recent modelling attempts incorporate boundedly rational agents into macro models fully capture all facts we document. discuss which dimensions are important heterogeneous-agents household transmission fiscal monetary policy.