In this study, we test whether regional growth in 11 European countries depends on financial development and suggest the use of cost- and profit-efficiency estimates as quality measures for financial institutions. Contrary to the usual quantitative proxies for financial development, the quality...

I construct a novel measure of household uncertainty based on survey data for European countries. I show that household uncertainty shocks are not universally like negative demand shocks. Notably, household uncertainty shocks are largely inflationary in Europe. These results lend support to a...

I study the effects of the Covid-19 pandemic on business confidence in 11 Euro area countries and its consequent impact on economic activity. To obtain causal effects, I instrument business confidence with domestic household confidence as well as average household confidence in neighboring...

We document a remarkable increase in economic belief polarization - disagreement - regarding the future state of the economy across Europe during the Covid-19 pandemic. We find evidence suggesting that belief polarization may have impeded the implementation of pandemic response measures such as...

I construct a novel measure of household uncertainty based on survey data for European countries. I show that household uncertainty shocks do not universally behave like negative demand shocks. Notably, household uncertainty shocks are largely inflationary in Europe. Further analysis, including...

Barsky and Sims (2012, AER) demonstrated, via indirect inference, that confidence innovations can be viewed as noisy signals about medium-term economic growth. They highlighted that the connection between confidence and subsequent activity, such as consumption and output, is primarily driven by...

This paper models the effects of financial development on economic growth through better or more efficient utilization of technological innovations. The model is based on the endogenous growth theory of Aghion and Howitt and its derivatives, especially the growth model of Aghion, Howitt and...

In his celebrated 1966 Econometrica article, Granger first hypothesized that there is a ‘typical’ spectral shape for an economic variable. This ‘typical’ shape implies decreasing levels of energy as frequency increases, which in turn implies an extremely long cycle in economic...

This theoretical paper explores the effects of costly and non-costly collateral on moral hazard, when collateral value may fluctuate. Given that all collateral is costly, stochastic collateral will entail the same positive incentive effects as nonstochastic collateral, provided the variation in...

We show how banks' excessive risk-taking, stemming from informational asymmetries in loan markets, can lead to an excessive output loss when a recession starts. Risk-based capital requirements can alleviate the output loss by reducing excessive risk-taking in ‘normal' times. Model simulations...