Who is Learning From Whom? A Study of Households Forming Expectations in the US and UK

The present paper outlines a theoretical model of agent-based learning. An agent ‘anchors’ his subjective expectations (or forecasts) to another agent’s subjective expectations. The former believes the latter has a better information set and, therefore, able to make better subjective expectations. The dynamic learning model is the basis of the empirical analysis. We investigate how households in the US and UK form their expectations. More specifically: who learns from whom? We find that the US household’s forecasts follow UK household when forming their forecasts.