Animal Spirits, Heterogeneous Expectations and the Emergence of Booms and Busts

Arbeitspapier

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.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: Working Paper ; No. 7

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Business Fluctuations; Cycles ; Search; Learning; Information and Knowledge; Communication; Belief; Unawareness ; Expectations; Speculations
• Thema: Heterogeneous Expectations ; Crises ; Animal Spirits

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Assenza, Tiziana ; Brock, William ; Hommes, Cars
• Ereignis: Veröffentlichung
• (wer): Università Cattolica del Sacro Cuore, Dipartimento di Economia e Finanza (DISCE)
• (wo): Milano
• (wann): 2013

Weitere Informationen

• Handle: http://hdl.handle.net/10419/170604
• Letzte Aktualisierung: 10.03.2025, 11:42 MEZ