Prague Economic Papers 2019, 28(2):155-177 | DOI: 10.18267/j.pep.690

Impact of Behavioural Attention on the Households Foreign Currency Savings as a Response to the External Macroeconomic Shocks

Vilma Deltuvaitė1, Svatopluk Kapounek2, Petr Koráb3
1 Kaunas University of Technology, Kaunas, Lithuania (deltuvaite.v@ans.lt)
2 Mendel University in Brno, Czech Republic, and Kaunas University of Technology, Kaunas, Lithuania (kapounek@mendelu.cz)
3 Mendel University in Brno, Czech Republic, and Kaunas University of Technology, Kaunas, Lithuania (petr.korab@mendelu.cz)

This paper investigates the impact of behavioural attention on the households' foreign currency savings as a response to the external macroeconomic shocks. The information that the households acquire via different communication channels is expected to influence their decisions regarding their savings' allocation into different currencies. This study has applied the fundamental macroeconomic models by including individuals' attention to the specific risks and search interest in specific keywords on Google in order to assess the impact of acquired information and its communication channel on the households' foreign currency savings. We employed a two-level mixed effects model including macroeconomic fundamentals and individuals' attention to the information determinants. We solved a problem of a long list of potential explanatory variables (keywords) by employing the Bayesian Model Averaging. This study assumes that households are more sensitive to the macroeconomic shocks (factors) if they search simultaneously for infor-mation on Google about these factors or specific related risks. The results emphasize the role behavioural attention during financial turmoil and economic downturn periods, especially in the environment of very low interest rates.

Keywords: foreign exchange, macroeconomic shocks, households, behavioural attention, Google Trends, Bayesian Model Averaging,
JEL classification: C11, C23, D14, F31, F62, G11

Accepted: April 23, 2018; Published: April 1, 2019  Show citation

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Deltuvaitė, V., Kapounek, S., & Koráb, P. (2019). Impact of Behavioural Attention on the Households Foreign Currency Savings as a Response to the External Macroeconomic Shocks. Prague Economic Papers, 28(2), 155-177. doi: 10.18267/j.pep.690
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