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The Stock Market Crash of 2008 Caused the Great Recession: Theory and Evidence

Farmer, Roger E A - C.E.P.R. Discussion Papers - 2011

This paper argues that the stock market crash of 2008, triggered by a collapse in house prices, caused the Great Recession. The paper has three parts. First, it provides evidence of a high correlation between the value of the stock market and the unemployment rate in U.S. data since 1929....

Persistent link: https://www.econbiz.de/10009351524

The European Phillips Curve: Does the NAIRU Exist?

Karanassou, Marika; Sala, Hector; Snower, Dennis J. - C.E.P.R. Discussion Papers - 2003

This paper has two aims. First, it provides simple theoretical models that highlight two channels whereby monetary shocks have permanent real effects and the interactions between these channels. Second, it presents an empirical dynamic model, covering a panel of EU countries, and derives the...

Persistent link: https://www.econbiz.de/10005667015

Housing Wealth isn't Wealth

Buiter, Willem H. - C.E.P.R. Discussion Papers - 2008

A fall in house prices due to a change in fundamental value redistributes wealth from those long housing (for whom the fundamental value of the house they own exceeds the present discounted value of their planned future consumption of housing services) to those short housing. In a representative...

Persistent link: https://www.econbiz.de/10005792518

Consumption, 'Credit Crunches' and Financial Deregulation

Scott, Andrew - C.E.P.R. Discussion Papers - 1996

We examine whether credit contributes to business cycle fluctuations by directly affecting consumption rather than through the now well-understood investment channel. Examining UK data we argue that consumers face a rising interest rate schedule whereby additional borrowing leads to higher...

Persistent link: https://www.econbiz.de/10005124444

Escaping Nash and Volatile Inflation

Ellison, Martin; Yates, Tony - C.E.P.R. Discussion Papers - 2007

Why is inflation so much lower and at the same time more stable in developed economies in the 1990s, compared with the 1970s? This paper suggests that the United Kingdom, United States and other countries may have escaped from a volatile inflation equilibrium. Our argument builds on the story...

Persistent link: https://www.econbiz.de/10005504556

Credit Channels in a Liquidity Trap

Mertens, Karel; Ravn, Morten O - C.E.P.R. Discussion Papers - 2011

We study liquidity trap dynamics driven by nonfundamental shifts in expectations in a model with nominal rigidities, housing, credit frictions and a Taylor rule. Highly leveraged borrowing through nominal debt backed by real estate collateral greatly magnifies the decline in output and house...

Persistent link: https://www.econbiz.de/10008921771

The Social Cost of Near-Rational Investment

Hassan, Tarek; Mertens, Thomas M. - C.E.P.R. Discussion Papers - 2014

We show that the stock market may fail to aggregate information even if it appears to be efficient and that the resulting decrease in the information content of stock prices may drastically reduce welfare. We solve a macroeconomic model in which information about fundamentals is dispersed and...

Persistent link: https://www.econbiz.de/10011083430

Information Aggregation in a DSGE Model

Hassan, Tarek; Mertens, Thomas M. - C.E.P.R. Discussion Papers - 2014

We introduce the information microstructure of a canonical noisy rational expectations model (Hellwig, 1980) into the framework of a conventional real business cycle model. Each household receives a private signal about future productivity. In equilibrium, the stock price serves to aggregate and...

Persistent link: https://www.econbiz.de/10011083546

The Return of Financial Repression

Reinhart, Carmen M. - C.E.P.R. Discussion Papers - 2012

Periods of high indebtedness have historically been associated with a rising incidence of default or restructuring of public and private debts. Sometimes the debt restructuring is more subtle and takes the form of 'financial repression'. Consistent negative real interest rates are equivalent to...

Persistent link: https://www.econbiz.de/10011083679

Cúrdia, Vasco; Reis, Ricardo - C.E.P.R. Discussion Papers - 2010

The dynamic stochastic general equilibrium (DSGE) models that are used to study business cycles typically assume that … Bayesian econometric method that uses conjugate conditionals to make the estimation of DSGE models with correlated disturbances … disturbances resolves some conflicts between estimates from DSGE models and those from vector autoregressions, and that a key …

Persistent link: https://www.econbiz.de/10008468649

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