Data and Code for: Ambiguity Aversion and Heterogeneity in Households' Beliefs

UK households who wish for lower inflation and lower nominal interest rates have a higher expected inflation. We interpret the evidence through the lenses of a New- Keynesian model where ambiguity-averse households differ in wealth, skill, labor market participation, and receipt of government transfers and are subject to Knightian uncertainty. Households act based on beliefs which are negatively affected by their wishes, the more so the greater the amount of uncertainty. Using indirect inference, we find substantial output costs due to uncertainty. Monetary policy uncertainty con- tributes little to the costs because households generally dislike monetary expansions.