Arbeitspapier
Animal Spirits, Heterogeneous Expectations and the Emergence of Booms and Busts
We introduce a simple equilibrium model of a market for loans, where households lend to firms based on heterogeneous expectations about their loan default probability. Agents select among heterogeneous expectation rules, based upon their relative performance. A small fraction of pessimistic traders already has a large aggregate effect, leading to a crisis characterized by high contract rates for loans and low output. Our stylized model illustrates how animal spirits and heterogeneous expectations amplify boom and bust cycles and how endogenous coordination on pessimistic expectations amplifies crises and slows down recovery. Taking heterogeneous expectations and bounded rationality into account is crucial for the timing of monetary or fiscal policy.
- Language
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Englisch
- Bibliographic citation
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Series: Working Paper ; No. 7
- Classification
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Wirtschaft
Business Fluctuations; Cycles
Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
Expectations; Speculations
- Subject
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Heterogeneous Expectations
Crises
Animal Spirits
- Event
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Geistige Schöpfung
- (who)
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Assenza, Tiziana
Brock, William
Hommes, Cars
- Event
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Veröffentlichung
- (who)
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Università Cattolica del Sacro Cuore, Dipartimento di Economia e Finanza (DISCE)
- (where)
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Milano
- (when)
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2013
- Handle
- Last update
-
10.03.2025, 11:42 AM CET
Data provider
This object is provided by:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Assenza, Tiziana
- Brock, William
- Hommes, Cars
- Università Cattolica del Sacro Cuore, Dipartimento di Economia e Finanza (DISCE)
Time of origin
- 2013
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