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Author: Jane Maria Ryngaert Publisher: ISBN: Category : Languages : en Pages : 262
Book Description
This dissertation empirically investigates the expectations formation process and the constraints that economic agents face in forming beliefs about macroeconomic variables. Chapter 1 contributes to and extends our current understanding of information frictions in expectations. I first propose a new framework for estimating noisy information using individual forecasts, rather than mean forecasts as commonly done in previous work. This approach provides more power for identifying underlying information rigidities. I further extend this framework to incorporate misperceptions on the part of economic agents about the persistence of the underlying process being forecasted. Applying this framework to the U.S. inflation forecasts of professional forecasters points toward significantly less noisy information than previous estimates suggest but reveals a systematic underestimation on the part of forecasters of the persistence of inflation. Using a structural model that incorporates both noisy signals and misperceptions of persistence, I quantify the relative importance of each channel in accounting for the expectations formation process of these agents. The results indicate that, even for professional forecasters, there are multiple forces that generate economically significant deviations from full information. Chapter 2 is joint work with Olivier Coibion, Yuriy Gorodnichenko, and Saten Kumar. Using novel survey questions on the higher-order expectations of firm managers, we study the formation and evolution of these beliefs. A unique experimental approach allows us to characterize the degree of higher-order thinking of economic agents and how this degree of higher-order thinking affects managers' expectations as well as their economic decisions. We then relate these results to macroeconomic models in which higher order thinking matters for dynamics. Chapter 3 is develops a method for measuring the information flow of economic agents at a given point in time using survey data. I document a reduction in attention to several macroeconomic variables over time. I further document that in periods in which agents are paying more attention to a specific variable, there is also greater cross-sectional dispersion in attention across agents.
Author: Jane Maria Ryngaert Publisher: ISBN: Category : Languages : en Pages : 262
Book Description
This dissertation empirically investigates the expectations formation process and the constraints that economic agents face in forming beliefs about macroeconomic variables. Chapter 1 contributes to and extends our current understanding of information frictions in expectations. I first propose a new framework for estimating noisy information using individual forecasts, rather than mean forecasts as commonly done in previous work. This approach provides more power for identifying underlying information rigidities. I further extend this framework to incorporate misperceptions on the part of economic agents about the persistence of the underlying process being forecasted. Applying this framework to the U.S. inflation forecasts of professional forecasters points toward significantly less noisy information than previous estimates suggest but reveals a systematic underestimation on the part of forecasters of the persistence of inflation. Using a structural model that incorporates both noisy signals and misperceptions of persistence, I quantify the relative importance of each channel in accounting for the expectations formation process of these agents. The results indicate that, even for professional forecasters, there are multiple forces that generate economically significant deviations from full information. Chapter 2 is joint work with Olivier Coibion, Yuriy Gorodnichenko, and Saten Kumar. Using novel survey questions on the higher-order expectations of firm managers, we study the formation and evolution of these beliefs. A unique experimental approach allows us to characterize the degree of higher-order thinking of economic agents and how this degree of higher-order thinking affects managers' expectations as well as their economic decisions. We then relate these results to macroeconomic models in which higher order thinking matters for dynamics. Chapter 3 is develops a method for measuring the information flow of economic agents at a given point in time using survey data. I document a reduction in attention to several macroeconomic variables over time. I further document that in periods in which agents are paying more attention to a specific variable, there is also greater cross-sectional dispersion in attention across agents.
Author: Cathy Zhang Publisher: ISBN: 9781303141652 Category : Languages : en Pages : 225
Book Description
This dissertation consists of three essays on information frictions and liquidity in macroeconomics. The first chapter introduces a form of bounded rationality called adaptive learning in a news-driven economy in order to better explain the depth and persistence of recessions. In doing so, this paper adopts expectational stability ("E-stability") as a natural criterion for rationality. In examining the model's stability properties, I find that when agents do not observe current state variables when forming expectations, the rational expectations equilibrium (REE) is not learnable for calibrated parameter values capable of generating news-driven recessions. The second chapter develops an information-based theory of international currency based on search frictions, private trading histories, and imperfect recognizability of assets. Using an open-economy search model with multiple competing currencies, the value of each currency is determined without requiring agents to use a particular currency to purchase a country's goods. Strategic complementarities in portfolio choices and information acquisition decisions generate multiple equilibria with different types of payment arrangements. While some inflation can benefit the country issuing an international currency, the threat of losing international status puts an inflation discipline on the issuing country. When monetary authorities interact in a simple policy game, the temptation to inflate can lead optimal policy to deviate from the Friedman rule. The third chapter is joint work with Sebastien Lotz and studies the choice of payment instruments in a simple model where both money and credit can be used as means of payment. We endogenize the acceptability of credit by allowing retailers to invest in a costly record-keeping technology. Our framework captures the two-sided market interaction between consumers and retailers, leading to strategic complementarities that can generate multiple steady-state equilibria. In addition, limited commitment makes debt contracts self-enforcing and yields an endogenous upper bound on credit use. Our model can explain why the demand for credit declines as inflation falls, and how hold-up problems in technological adoption can prevent retailers from accepting credit as consumers continue to coordinate on cash usage.
Author: Jennifer La'O Publisher: ISBN: Category : Languages : en Pages : 220
Book Description
This dissertation consists of four chapters analyzing the effects of heterogeneous and asymmetric information in macroeconomic and financial settings, with an emphasis on short-run fluctuations. Within these chapters, I study the implications these informational frictions may have for the behavior of firms and financial institutions over the business cycle and during crises episodes. The first chapter examines how collateral constraints on firm-level investment introduce a powerful two-way feedback between the financial market and the real economy. On one hand, real economic activity forms the basis for asset dividends. On the other hand, asset prices affect collateral value, which in turn determines the ability of firms to invest. In this chapter I show how this two-way feedback can generate significant expectations-driven fluctuations in asset prices and macroeconomic outcomes when information is dispersed. In particular, I study the implications of this two-way feedback within a micro-founded business-cycle economy in which agents are imperfectly, and heterogeneously, informed about the underlying economic fundamentals. I then show how tighter collateral constraints mitigate the impact of productivity shocks on equilibrium output and asset prices, but amplify the impact of "noise", by which I mean common errors in expectations. Noise can thus be an important source of asset-price volatility and business-cycle fluctuations when collateral constraints are tight. The second chapter is based on joint work with George-Marios Angeletos. In this chapter we investigate a real-business-cycle economy that features dispersed information about underlying aggregate productivity shocks, taste shocks, and-potentially-shocks to monopoly power. We show how the dispersion of information can (i) contribute to significant inertia in the response of macroeconomic outcomes to such shocks; (ii) induce a negative short-run response of employment to productivity shocks; (iii) imply that productivity shocks explain only a small fraction of high-frequency fluctuations; (iv) contribute to significant noise in the business cycle; (v) formalize a certain type of demand shocks within an RBC economy; and (vi) generate cyclical variation in observed Solow residuals and labor wedges. Importantly, none of these properties requires significant uncertainty about the underlying fundamentals: they rest on the heterogeneity of information and the strength of trade linkages in the economy, not the level of uncertainty. Finally, none of these properties are symptoms of inefficiency: apart from undoing monopoly distortions or providing the agents with more information, no policy intervention can improve upon the equilibrium allocations. The third chapter is also based on joint work with George-Marios Angeletos. This chapter investigates how incomplete information affects the response of prices to nominal shocks. Our baseline model is a variant of the Calvo model in which firms observe the underlying nominal shocks with noise. In this model, the response of prices is pinned down by three parameters: the precision of available information about the nominal shock; the frequency of price adjustment; and the degree of strategic complementarity in pricing decisions. This result synthesizes the broader lessons of the pertinent literature. However, this synthesis provides only a partial view of the role of incomplete information: once one allows for more general information structures than those used in previous work, one cannot quantify the degree of price inertia without additional information about the dynamics of higher-order beliefs, or of the agents' forecasts of inflation. We highlight this with three extensions of our baseline model, all of which break the tight connection between the precision of information and higher-order beliefs featured in previous work. Finally, the fourth chapter studies how predatory trading affects the ability of banks and large trading institutions to raise capital in times of temporary financial distress in an environment in which traders are asymmetrically informed about each others' balance sheets. Predatory trading is a strategy in which a trader can profit by trading against another trader's position, driving an otherwise solvent but distressed trader into insolvency. The predator, however, must be sufficiently informed of the distressed trader's balance sheet in order to exploit this position. I find that when a distressed trader is more informed than other traders about his own balances, searching for extra capital from lenders can become a signal of financial need, thereby opening the door for predatory trading and possible insolvency. Thus, a trader who would otherwise seek to recapitalize is reluctant to search for extra capital in the presence of potential predators. Predatory trading may therefore make it exceedingly difficult for banks and financial institutions to raise credit in times of temporary financial distress.
Author: Juan J. Dolado Publisher: Emerald Group Publishing ISBN: 1803826371 Category : Business & Economics Languages : en Pages : 200
Book Description
Both parts of Volume 44 of Advances in Econometrics pay tribute to Fabio Canova for his major contributions to economics over the last four decades.
Author: Stephen Broadberry Publisher: Cambridge University Press ISBN: 1139448358 Category : History Languages : en Pages : 363
Book Description
This unique volume offers a definitive new history of European economies at war from 1914 to 1918. It studies how European economies mobilised for war, how existing economic institutions stood up under the strain, how economic development influenced outcomes and how wartime experience influenced post-war economic growth. Leading international experts provide the first systematic comparison of economies at war between 1914 and 1918 based on the best available data for Britain, Germany, France, Russia, the USA, Italy, Turkey, Austria-Hungary and the Netherlands. The editors' overview draws some stark lessons about the role of economic development, the importance of markets and the damage done by nationalism and protectionism. A companion volume to the acclaimed The Economics of World War II, this is a major contribution to our understanding of total war.
Author: Annette Godart-van der Kroon Publisher: Springer ISBN: 3319758179 Category : Business & Economics Languages : en Pages : 282
Book Description
This book discusses contemporary banking and monetary policy issues from the perspective of the Austrian School of Economics. Based on the heritage of the Austrian school, leading scholars and practitioners offer a coherent diagnosis and analysis of the factors leading to Europe’s current financial crisis. The first part of the book discusses Ludwig von Mises’s and Friedrich August von Hayek’s ideas on banking and monetary policy from both historical and economic standpoints. It includes contributions on Austrian monetary dynamics and micro-foundational business cycle theory, von Mises’s concepts of liquidity and solvency of fractional-reserve banks, and liberalism of Austrian economics. The second part analyzes the measures taken by the European Central Bank (ECB) in light of the ideas of von Mises and Hayek. It includes contributions on non-neutrality of money, ECB monetary policy, and the future of the ECB. The third and final part presents discussions on monetary reforms, including contributions on Bitcoins, Cryptocurrencies and anti-deflationist Paranoia.
Author: Frederic S. Mishkin Publisher: MIT Press ISBN: 0262134829 Category : Monetary policy Languages : en Pages : 561
Book Description
This book by a leading authority on monetary policy offers a unique view of the subject from the perspectives of both scholar and practitioner. Frederic Mishkin is not only an academic expert in the field but also a high-level policymaker. He is especially well positioned to discuss the changes in the conduct of monetary policy in recent years, in particular the turn to inflation targeting. Monetary Policy Strategydescribes his work over the last ten years, offering published papers, new introductory material, and a summing up, "Everything You Wanted to Know about Monetary Policy Strategy, But Were Afraid to Ask," which reflects on what we have learned about monetary policy over the last thirty years. Mishkin blends theory, econometric evidence, and extensive case studies of monetary policy in advanced and emerging market and transition economies. Throughout, his focus is on these key areas: the importance of price stability and a nominal anch fiscal and financial preconditions for achieving price stability; central bank independence as an additional precondition; central bank accountability; the rationale for inflation targeting; the optimal inflation target; central bank transparency and communication; and the role of asset prices in monetary policy.
Author: Jane Maria Ryngaert
Author: Jane Maria Ryngaert
Author: Cathy Zhang
Author: Jennifer La'O
Author: Cesar Carrera
Author: Juan J. Dolado
Author: Stephen Broadberry
Author: Olivier Coibion
Author: Kenneth Joseph Arrow
Author: Annette Godart-van der Kroon
Author: Frederic S. Mishkin