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Signaling asset price bubbles with time-series methods

Taipalus, Katja - Suomen Pankki - 2012

This paper provides an early warning indicator for bubbles in financial markets. The indicator is based on traditional … consensus bubbles and gives warning signals well ahead of the crash, in most cases as early as 12 months ahead. The indicator … also signals most of the 'negative bubbles' before their turning points. …

Persistent link: https://www.econbiz.de/10010611666

Detecting asset price bubbles with time-series methods

Taipalus, Katja - Suomen Pankki - 2012

conventional unit root tests in modified forms can be used to construct early warning indicators for bubbles in financial markets … 1871, they are able to signal most of the consensus bubbles, defined as stock market booms for example by the IMF, and they … bubbles from the data. Finally, these early warning indicators are applied to data for several housing markets. In most of the …

Persistent link: https://www.econbiz.de/10010818810

Learning as a rational foundation for macroeconomics and finance

Evans, George W; Honkapohja, Seppo - Suomen Pankki - 2011

Expectations play a central role in modern macroeconomics. The econometric learning approach, in line with the cognitive consistency principle, models agents as forming expectations by estimating and updating subjective forecasting models in real time. This approach provides a stability test for...

Persistent link: https://www.econbiz.de/10008918570

Adaptive learning and multiple equilibria in a natural rate monetary model with unemployment persistence

Rantala, Anssi - Suomen Pankki - 2003

This paper demonstrates that the adaptive learning approach to modelling private sector expectations can be used as an equilibrium selection mechanism in a natural-rate monetary model with unemployment persistence. In particular, it is shown that only one of the two rational expectations...

Persistent link: https://www.econbiz.de/10005207142

Policy change and learning in the RBC model

Mitra, Kaushik; Evans, George W.; Honkapohja, Seppo - Suomen Pankki - 2011

What is the impact of surprise and anticipated policy changes when agents form expectations using adaptive learning rather than rational expectations? We examine this issue using the standard stochastic real business cycle model with lump-sum taxes. Agents combine knowledge about future policy...

Persistent link: https://www.econbiz.de/10009368524

Fiscal policy and learning

Mitra, Kaushik; Evans, George W.; Honkapohja, Seppo - Suomen Pankki - 2012

Using the standard real business cycle model with lump-sum taxes, we analyze the impact of fiscal policy when agents form expectations using adaptive learning rather than rational expectations (RE). The output multipliers for government purchases are significantly higher under learning, and fall...

Persistent link: https://www.econbiz.de/10010611668

Expectational business cycles

Guse, Eran - Suomen Pankki - 2004

I introduce Expectational Business Cycles where aggregate activity fluctuates due to learning, heterogeneous updating rules and random changes in the social norm predictor. Agents use one of two updating rules to learn the equilibrium values while heterogeneity is dictated via an evolutionary...

Persistent link: https://www.econbiz.de/10005771132

Does Ricardian Equivalence hold when expectations are not rational?

Evans, George W; Honkapohja, Seppo; Mitra, Kaushik - Suomen Pankki - 2010

This paper shows that the Ricardian Equivalence proposition can continue to hold when expectations are not rational and are instead formed using adaptive learning rules. In temporary equilibrium, with given expectations, Ricardian Equivalence holds under the standard conditions for its validity...

Persistent link: https://www.econbiz.de/10008516097

Expectations, learning and monetary policy: an overview of recent research

Evans, George W; Honkapohja, Seppo - Suomen Pankki - 2007

Expectations about the future are central for determination of current macroeconomic outcomes and the formulation of monetary policy. Recent literature has explored ways for supplementing the benchmark of rational expectations with explicit models of expectations formation that rely on...

Persistent link: https://www.econbiz.de/10005419689

Policy interaction, learning and the fiscal theory of prices

Evans, George W.; Honkapohja, Seppo - Suomen Pankki - 2002

We investigate both the rational explosive inflation paths studied by McCallum (2001) and the classification of fiscal and monetary policies proposed by Leeper (1991) for stability under learning of rational expectations equilibria (REE). Our first result is that the fiscalist REE in the model...

Persistent link: https://www.econbiz.de/10005423711