A behavioral model of the credit cycle

Annicchiarico, Barbara; Surricchio, Silvia; Waldmann, Robert

doi:10.1016/j.jebo.2019.09.010

Cited by 9 publications

(2 citation statements)

References 54 publications

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“…The behavioral model [24] shows that differences in attitudes combined with borrowing constraints tend to restrain economic growth but generate a chain reaction that exacerbates recessions. The model is an example of endogenous credit cycles with expansions, severe recessions, and persistent wealth inequality.…”

Section: Literature Reviewmentioning

confidence: 99%

Peculiarity of Behavior of Economic Agents under Cognitive Constraints in a Semi-Open New Keynesian Model

Serkov,

Krasnykh

2023

Mathematics

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The aim of the paper is to analyze changes and peculiarities of behavior of economic agents with bounded rationality in the New Keynesian model, in which imported equipment and technology are one of the factors of production, and households consume only domestic products. The formation of output gap and inflation expectations by agents is based on stationary values of these variables and on extrapolation of the latest available data on inflation and the output gap. The weight shares of agents applying these rules change endogenously. Histograms of the frequency distribution of the degree of buoyancy and the impulse responses of monetary policy shocks and technology shocks to the variables under study show that a less open economy tends to go through an economic cycle with a smaller amplitude than a more rigid economy. Analyses of the trade-offs between the volatility of inflation and the output gap at different parameter values in the Taylor rule show their non-linear nature (in contrast to standard models with rational expectations). An important result obtained in this analysis is that the rational expectations hypothesis is more consistent with a closed economy than with an open one.

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Section: Literature Reviewmentioning

confidence: 99%

Peculiarity of Behavior of Economic Agents under Cognitive Constraints in a Semi-Open New Keynesian Model

Serkov,

Krasnykh

2023

Mathematics

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“…As previously indicated, the literature on heterogeneous expectations (see for instance Branch and McGough (2018)) mainly focuses on aggregate dynamics and does not explicitly consider differences in consumption and wealth of the different agent types. Recent exceptions are Beqiraj et al (2019) and Annicchiarico et al (2019). The former calculate a measure of consumption inequality in their economy.…”

Section: Introductionmentioning

confidence: 99%

Essays on boundedly rational expectations in macroeconomics

Hagenhoff¹

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What are the implications of simple deviations from rational expectations for macroeconomic dynamics, monetary policy, consumption decisions and labor markets? Which biases underly even sophisticated survey expectations? I aim to answer these questions by building upon simple mathematical models of expectations that are boundedly rational and generate some disagreement across expectations. While monetary policy should be extraordinarily hawkish if it wants to control inflation under such expectations, it also generates substantial dispersion in consumption and wealth. Further, the sluggishness of labor market variables may be explained by sluggish expectations that affect, for instance, wage bargaining. Finally, expectations of professional forecasters are intrinsically persistent, depend on the last observed consensus forecast and also extrapolate current news more than would be rational.

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