Download or read book Information Acquisition and Learning from Prices Over the Business Cycle written by Taneli Mäkinen and published by . This book was released on 2016 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study firms' incentives to acquire costly information in booms and recessions to understand the role of endogenous information in explaining business cycles. We find that when the economy has been in a recession in the previous period, and firms enter the current period with a pessimistic belief, the incentive to acquire information is stronger than when the economy has been in a boom and firms share an optimistic belief. The cyclicality of the aggregate learning outcome is moderated by the price system, which transmits information from informed to uninformed firms, thus dampening information demand. Though learning from equilibrium prices acts to stabilize fluctuations by discouraging information acquisition, it can be welfare-enhancing to make information prohibitively costly to obtain.

Download or read book Information Acquisition and Learning from Prices Over the Business Cycle written by Taneli Mäkinen and published by . This book was released on 2014 with total page 31 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Hysteresis and Business Cycles written by Ms.Valerie Cerra and published by International Monetary Fund. This book was released on 2020-05-29 with total page 50 pages. Available in PDF, EPUB and Kindle. Book excerpt: Traditionally, economic growth and business cycles have been treated independently. However, the dependence of GDP levels on its history of shocks, what economists refer to as “hysteresis,” argues for unifying the analysis of growth and cycles. In this paper, we review the recent empirical and theoretical literature that motivate this paradigm shift. The renewed interest in hysteresis has been sparked by the persistence of the Global Financial Crisis and fears of a slow recovery from the Covid-19 crisis. The findings of the recent literature have far-reaching conceptual and policy implications. In recessions, monetary and fiscal policies need to be more active to avoid the permanent scars of a downturn. And in good times, running a high-pressure economy could have permanent positive effects.

Download or read book Information Choice in Macroeconomics and Finance written by Laura L. Veldkamp and published by Princeton University Press. This book was released on 2023-03-07 with total page 184 pages. Available in PDF, EPUB and Kindle. Book excerpt: An authoritative graduate textbook on information choice, an exciting frontier of research in economics and finance Most theories in economics and finance predict what people will do, given what they know about the world around them. But what do people know about their environments? The study of information choice seeks to answer this question, explaining why economic players know what they know—and how the information they have affects collective outcomes. Instead of assuming what people do or don't know, information choice asks what people would choose to know. Then it predicts what, given that information, they would choose to do. In this textbook, Laura Veldkamp introduces graduate students in economics and finance to this important new research. The book illustrates how information choice is used to answer questions in monetary economics, portfolio choice theory, business cycle theory, international finance, asset pricing, and other areas. It shows how to build and test applied theory models with information frictions. And it covers recent work on topics such as rational inattention, information markets, and strategic games with heterogeneous information. Illustrates how information choice is used to answer questions in monetary economics, portfolio choice theory, business cycle theory, international finance, asset pricing, and other areas Teaches how to build and test applied theory models with information frictions Covers recent research on topics such as rational inattention, information markets, and strategic games with heterogeneous information

Download or read book Handbook of Macroeconomics written by John B. Taylor and published by Elsevier. This book was released on 2016-11-12 with total page 2744 pages. Available in PDF, EPUB and Kindle. Book excerpt: Handbook of Macroeconomics Volumes 2A and 2B surveys major advances in macroeconomic scholarship since the publication of Volume 1 (1999), carefully distinguishing between empirical, theoretical, methodological, and policy issues, including fiscal, monetary, and regulatory policies to deal with crises, unemployment, and economic growth. As this volume shows, macroeconomics has undergone a profound change since the publication of the last volume, due in no small part to the questions thrust into the spotlight by the worldwide financial crisis of 2008. With contributions from the world’s leading macroeconomists, its reevaluation of macroeconomic scholarship and assessment of its future constitute an investment worth making. Serves a double role as a textbook for macroeconomics courses and as a gateway for students to the latest research Acts as a one-of-a-kind resource as no major collections of macroeconomic essays have been published in the last decade Builds upon Volume 1 by using its section headings to illustrate just how far macroeconomic thought has evolved

Download or read book Marginal Costs and Price Over the Business Cycle written by Robert A. Hart and published by . This book was released on 1995 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book NBER Macroeconomics Annual 2009 written by Daron Acemoglu and published by . This book was released on 2010-07 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: The NBER Macroeconomics Annual provides a forum for important debates in contemporary macroeconomics and major developments in the theory of macroeconomic analysis and policy that include leading economists from a variety of fields. The papers and accompanying discussions in NBER Macroeconomics Annual 2009 address how heterogeneous beliefs interact with equilibrium leverage and potentially lead to leverage cycles, the validity of alternative hypotheses about the reason for the recent increase in foreclosures on residential mortgages, the credit rating crisis, quantitative implications for the evolution of the U.S. wage distribution, and noisy business cycles.

Download or read book Principles written by Ray Dalio and published by Simon and Schuster. This book was released on 2018-08-07 with total page 560 pages. Available in PDF, EPUB and Kindle. Book excerpt: #1 New York Times Bestseller “Significant...The book is both instructive and surprisingly moving.” —The New York Times Ray Dalio, one of the world’s most successful investors and entrepreneurs, shares the unconventional principles that he’s developed, refined, and used over the past forty years to create unique results in both life and business—and which any person or organization can adopt to help achieve their goals. In 1975, Ray Dalio founded an investment firm, Bridgewater Associates, out of his two-bedroom apartment in New York City. Forty years later, Bridgewater has made more money for its clients than any other hedge fund in history and grown into the fifth most important private company in the United States, according to Fortune magazine. Dalio himself has been named to Time magazine’s list of the 100 most influential people in the world. Along the way, Dalio discovered a set of unique principles that have led to Bridgewater’s exceptionally effective culture, which he describes as “an idea meritocracy that strives to achieve meaningful work and meaningful relationships through radical transparency.” It is these principles, and not anything special about Dalio—who grew up an ordinary kid in a middle-class Long Island neighborhood—that he believes are the reason behind his success. In Principles, Dalio shares what he’s learned over the course of his remarkable career. He argues that life, management, economics, and investing can all be systemized into rules and understood like machines. The book’s hundreds of practical lessons, which are built around his cornerstones of “radical truth” and “radical transparency,” include Dalio laying out the most effective ways for individuals and organizations to make decisions, approach challenges, and build strong teams. He also describes the innovative tools the firm uses to bring an idea meritocracy to life, such as creating “baseball cards” for all employees that distill their strengths and weaknesses, and employing computerized decision-making systems to make believability-weighted decisions. While the book brims with novel ideas for organizations and institutions, Principles also offers a clear, straightforward approach to decision-making that Dalio believes anyone can apply, no matter what they’re seeking to achieve. Here, from a man who has been called both “the Steve Jobs of investing” and “the philosopher king of the financial universe” (CIO magazine), is a rare opportunity to gain proven advice unlike anything you’ll find in the conventional business press.

Download or read book Price Over Marginal Cost and the Business Cycle written by Alessandro Sembenelli and published by . This book was released on 1996 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book The Role of Informational Asymmetries in Financial Markets and the Real Economy written by Victoria Magdalena Vanasco and published by . This book was released on 2014 with total page 110 pages. Available in PDF, EPUB and Kindle. Book excerpt: The stability of national and, increasingly more often, the global economy relies on well-functioning financial markets. Households' consumption and saving decisions, firms' investment choices, and governments' financing strategies critically depend on the stability of financial markets. These markets, however, are composed of individuals and institutions that may have different objectives, information sets, and beliefs, making them a very complex object that we do not fully comprehend. Motivated by this, my dissertation focuses on understanding how informational asymmetries and belief heterogeneity impact financial markets, and therefore, the macro economy. More specifically, this dissertation explores the sources of informational asymmetries among market participants. How do different financial market structures provide incentives for private information acquisition? Is information acquisition desirable? What types of policies can be implemented to increase liquidity and "discipline" in financial markets? Could business cycles be related to information or belief cycles? I tackle these questions from three separate angles. First, I study how alternative market designs bring forth different levels of private information generation, "market discipline," and liquidity. Second, I investigate how information sets of key market participants are determined. Finally, I focus on how information and belief fluctuations may affect key macroeconomic variables and economic fluctuations. In Chapter 1, ``Information Acquisition vs. Liquidity in Financial Markets," I propose a parsimonious framework to study markets for asset-backed securities (ABS). These markets play an important role in providing lending capacity to the banking industry by allowing banks to sell the cashflows of their loans and thus recycle capital and reduce the riskiness of their portfolios. In the financial crash of 2008, however, in which certain ABS played a substantial role, we witnessed a collapse in the issuance of all ABS classes. Given the importance of these markets for the real economy, policy makers in the US and Europe have geared their efforts towards reviving them. A good framework to think about these markets is imperative when thinking about financial regulation. The contribution of this chapter is to propose a model that captures the two main problems that have been shown to be present in the practice of securitization. First, the increase in securitization has led to a decline in lending standards, suggesting that liquid markets for ABS reduce incentives to issue good quality loans. Second, securitizers have used private information about loan quality when choosing which loans to securitize, indicating that a problem of asymmetric information is present in ABS markets. A natural question then arises: how should ABS be designed to provide incentives to issue good quality loans and, at the same time, to preserve liquidity and trade in these markets? To address this question, I propose a framework to study ABS where both incentives and liquidity issues are considered and linked through a loan issuer's information acquisition decision. Loan issuers acquire private information about potential borrowers, use this information to screen loans, and later design and sell securities backed by these loans when in need of funds. While information is beneficial ex-ante when used to screen loans, it becomes detrimental ex-post because it introduces a problem of adverse selection that hinders trade in ABS markets. The model matches key features of these markets, such as the issuance of senior and junior tranches, and it predicts that when gains from trade in ABS markets are `sufficiently' large, information acquisition and loan screening are inefficiently low. There are two channels that drive this inefficiency. First, when gains from trade are large, a loan issuer is tempted ex-post to sell a large portion of its cashflows and thus does not internalize that lower retention implements less information acquisition. Second, the presence of adverse selection in secondary markets creates informational rents for issuers holding low quality loans, reducing the value of loan screening. This suggests that incentives for loan screening not only depend on the portion of loans retained by issuers, but also on how the market prices the issued tranches. Turning to financial regulation, I characterize the optimal mechanism and show that it can be implemented with a simple tax scheme. The obtained results, therefore, contribute to the recent debate on how to regulate markets for ABS. In Chapter 2, I present joint work with Matthew Botsch, ``Learning by Lending, Do Banks Learn?" where we investigate how banks form their information sets about the quality of their borrowers. There is a vast empirical and theoretical literature that points to the importance of borrower-lender relationships for firms' access to credit. In this chapter, we investigate one particular mechanism through which long-term relationships might improve access to credit. We hypothesize that while lending to a firm, a bank receives signals that allow it to learn and better understand the firm's fundamentals; and that this learning is private; that is, it is information that is not fully reflected in publicly-observable variables. We test this hypothesis using a dataset for 7,618 syndicated loans made between 1987 and 2003. We construct a variable that proxies for firm quality and is unobservable by the bank, so it cannot be priced when the firm enters our sample. We show that the loading on this factor in the pricing equation increases with relationship time, hinting that banks are able to learn about firm quality when they are in an established relationship with the firm. Our finding is robust to controlling for market-wide learning about firm fundamentals. This suggests that a significant portion of bank learning is private and is not shared by all market participants. The results obtained in this study underpin one of the main assumptions of the model presented in Chapter 1: that banks have a special ability to privately acquire valuable information about potential borrowers. While the model is static, the data suggests that the process of lending and of information acquisition is a dynamic one. Consistent with this, the last chapter of this dissertation studies the macroeconomic implications of dynamic learning by financial intermediaries. Chapter 3 presents joint work with Vladimir Asriyan titled ``Informed Intermediation over the Cycle." In this paper, we construct a dynamic model of financial intermediation in which changes in the information held by financial intermediaries generate asymmetric credit cycles as the one observed in the data. We model financial intermediaries as ''expert'' agents who have a unique ability to acquire information about firm fundamentals. While the level of ''expertise'' in the economy grows in tandem with information that the ''experts'' possess, the gains from intermediation are hindered by informational asymmetries. We find the optimal financial contracts and show that the economy inherits not only the dynamic nature of information flow, but also the interaction of information with the contractual setting. We introduce a cyclical component to information by supposing that the fundamentals about which experts acquire information are stochastic. While persistence of fundamentals is essential for information to be valuable, their randomness acts as an opposing force and diminishes the value of expert learning. Our setting then features economic fluctuations due to waves of ``confidence'' in the intermediaries' ability to allocate funds profitably.

Download or read book Essays on Macroeconomics written by Luis Gonzalo Llosa and published by . This book was released on 2012 with total page 161 pages. Available in PDF, EPUB and Kindle. Book excerpt: In these essays, I examine (i) the role of terms of trade in emerging countries and (ii) economic efficiency under endogenous information. The first chapter documents a negative relationship between the terms of trade - defined as the ratio of imports to the price of exports - and various macroeconomic variables such as output, consumption, investment and total factor productivity (TFP) in emerging economies. The second part of this chapter presents a small open economy business cycles model featuring intermediate imported inputs, monopolistic competition and input-output linkages. A calibrated version of the model reproduces the empirical facts documented in the first part. In particular, the model replicates the negative link between the terms of trade and TFP, providing an explanation to a long-standing puzzle in the business cycle literature. In addition, I show how terms of trade shocks help to increase the volatility of consumption above the volatility of output. The second and third chapters, which are part of an ongoing work with Venky Venkateswaran, examine economic efficiency under costly private information. In the second chapter, my co-author and I study the efficiency of equilibrium outcomes in models where monopolistically competitive firms acquire costly information about aggregate fundamentals before making pricing or quantity decisions. Using this framework we show that market power reduces the private value of information relative to its social value, causing too little investment in learning and inefficient cyclical fluctuations. Importantly, this is true even in an environment where the ex-post response to information is socially optimal, which is the case when firms choose labor input under uncertainty about aggregate productivity. When firms set nominal prices, however, their actions exhibit a inefficiently high sensitivity to their private signals. The combination of this inefficiency in information use and market power makes the overall direction of the inefficiency in information acquisition ambiguous. In terms of policy, we show that the standard full information response to market power-related distortions can reduce welfare under endogenous uncertainty. We also show how our analysis applies to coordination games in general, using the beauty contest framework. In the third chapter my co-author and I show that the same inefficiencies characterized in the previous chapter take place in standard business cycle models. In a RBC framework with dispersed information about technology shocks, distortions due to market power have no effect on incentives to respond to information, but distort the private value of information, leading to an inefficiently low level of information acquired in equilibrium. In a monetary model with nominal price-setting by heterogeneously informed firms, inefficiencies arise in both the use and the acquisition of information.

Download or read book Handbook of Economic Expectations written by Ruediger Bachmann and published by Elsevier. This book was released on 2022-11-04 with total page 876 pages. Available in PDF, EPUB and Kindle. Book excerpt: Handbook of Economic Expectations discusses the state-of-the-art in the collection, study and use of expectations data in economics, including the modelling of expectations formation and updating, as well as open questions and directions for future research. The book spans a broad range of fields, approaches and applications using data on subjective expectations that allows us to make progress on fundamental questions around the formation and updating of expectations by economic agents and their information sets. The information included will help us study heterogeneity and potential biases in expectations and analyze impacts on behavior and decision-making under uncertainty. Combines information about the creation of economic expectations and their theories, applications and likely futures Provides a comprehensive summary of economics expectations literature Explores empirical and theoretical dimensions of expectations and their relevance to a wide array of subfields in economics

Download or read book Business Cycles written by Victor Zarnowitz and published by University of Chicago Press. This book was released on 2007-11-01 with total page 613 pages. Available in PDF, EPUB and Kindle. Book excerpt: This volume presents the most complete collection available of the work of Victor Zarnowitz, a leader in the study of business cycles, growth, inflation, and forecasting.. With characteristic insight, Zarnowitz examines theories of the business cycle, including Keynesian and monetary theories and more recent rational expectation and real business cycle theories. He also measures trends and cycles in economic activity; evaluates the performance of leading indicators and their composite measures; surveys forecasting tools and performance of business and academic economists; discusses historical changes in the nature and sources of business cycles; and analyzes how successfully forecasting firms and economists predict such key economic variables as interest rates and inflation.

Download or read book Handbook of Monetary Economics 3A written by and published by Elsevier. This book was released on 2010-12-08 with total page 754 pages. Available in PDF, EPUB and Kindle. Book excerpt: What tools are available for setting and analyzing monetary policy? World-renowned contributors examine recent evidence on subjects as varied as price-setting, inflation persistence, the private sector's formation of inflation expectations, and the monetary policy transmission mechanism. Stopping short of advocating conclusions about the ideal conduct of policy, the authors focus instead on analytical methods and the changing interactions among the ingredients and properties that inform monetary models. The influences between economic performance and monetary policy regimes can be both grand and muted, and this volume clarifies the present state of this continually evolving relationship. Explores the models and practices used in formulating and transmitting monetary policies Raises new questions about the volume, price, and availability of credit in the 2007-2010 downturn Questions fiscal-monetary connnections and encourages new thinking about the business cycle itself Observes changes in the formulation of monetary policies over the last 25 years

Download or read book Handbook of Monetary Economics vols 3A 3B Set written by Benjamin M. Friedman and published by Elsevier. This book was released on 2010-11-10 with total page 1729 pages. Available in PDF, EPUB and Kindle. Book excerpt: How have monetary policies matured during the last decade? The recent downturn in economies worldwide have put monetary policies in a new spotlight. In addition to their investigations of new tools, models, and assumptions, they look carefully at recent evidence on subjects as varied as price-setting, inflation persistence, the private sector's formation of inflation expectations, and the monetary policy transmission mechanism. They also reexamine standard presumptions about the rationality of asset markets and other fundamentals. Stopping short of advocating conclusions about the ideal conduct of policy, the authors focus instead on analytical methods and the changing interactions among the ingredients and properties that inform monetary models. The influences between economic performance and monetary policy regimes can be both grand and muted, and this volume clarifies the present state of this continually evolving relationship. Presents extensive coverage of monetary policy theories with an eye toward questions raised by the recent financial crisis Explores the policies and practices used in formulating and transmitting monetary policies Questions fiscal-monetary connnections and encourages new thinking about the business cycle itself Observes changes in the formulation of monetary policies over the last 25 years

Download or read book The Economics of Information written by Kenneth Joseph Arrow and published by Harvard University Press. This book was released on 1984 with total page 302 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Economics for Investment Decision Makers written by Christopher D. Piros and published by John Wiley & Sons. This book was released on 2013-03-05 with total page 16 pages. Available in PDF, EPUB and Kindle. Book excerpt: The economics background investors need to interpret global economic news distilled to the essential elements: A tool of choice for investment decision-makers. Written by a distinguished academics and practitioners selected and guided by CFA Institute, the world’s largest association of finance professionals, Economics for Investment Decision Makers is unique in presenting microeconomics and macroeconomics with relevance to investors and investment analysts constantly in mind. The selection of fundamental topics is comprehensive, while coverage of topics such as international trade, foreign exchange markets, and currency exchange rate forecasting reflects global perspectives of pressing investor importance. Concise, plain-English introduction useful to investors and investment analysts Relevant to security analysis, industry analysis, country analysis, portfolio management, and capital market strategy Understand economic news and what it means All concepts defined and simply explained, no prior background in economics assumed Abundant examples and illustrations Global markets perspective