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Generalized Robustness and Dynamic Pessimism
Maenhout, Pascal J.; Vedolin, Andrea; Xing, Hao - 2022
This paper develops a theory of dynamic pessimism and its impact on asset prices. Notions of time-varying pessimism … endogenous state variable driving risk aversion, portfolio decisions, and equilibrium asset prices. Using survey data, we …
Persistent link: https://www.econbiz.de/10013297584
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Robust Monetary Policy Under Model Uncertainty in a Small Model of the U.S. Economy
Onatski, Alexei; Stock, James H. - 2021
This paper examines monetary policy in Rudebusch and Svensson's (1999) two equation macroeconomic model when the policymaker recognizes that the model is an approximation and is uncertain about the quality of that approximation. It is argued that the minimax approach of robust control provides a...
Persistent link: https://www.econbiz.de/10013310544
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Disequilibrium Dynamics with Inventories and Anticipatory Price-Setting : Some Impirical Results
Green, Jerry; Laffont, Jean-Jacques - 2021
The basic assumption of this paper is an attempt to be specific about price formation while retaining a fixed-price, quantity-constrained equilibration in the short-run. The second theme of this paper is the role of inventories in macrodynamics a topic of long-recognized importance, but one...
Persistent link: https://www.econbiz.de/10013236715
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Inventories
Ramey, Valerie A.; West, Kenneth D. - 2021
We review and interpret recent work on inventories, emphasizing empirical and business cycle aspects. We begin by documenting two empirical regularities about inventories. The first is the well-known one that inventories move procyclically. The second is that inventory movements are quite...
Persistent link: https://www.econbiz.de/10013210702
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Inventories, Rational Expectations, and the Business Cycle
Blinder, Alan S.; Fischer, Stanley - 2022
The simplest macroeconomic models in which markets clear instantaneously, and expectations are rational preclude the existence of "business cycles," that is, of serially correlated deviations of output from trend. This paper studies one of several mechanisms that can be used to make these...
Persistent link: https://www.econbiz.de/10014135401
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Uncertainty as Commitment
Nosal, Jaromir B. - 2013
Time-inconsistency of no-bailout policies can create incentives for banks to take excessive risks and generate endogenous crises when the government cannot commit. However, at the outbreak of financial problems, usually the government is uncertain about their nature, and hence it may delay...
Persistent link: https://www.econbiz.de/10013087435
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Disasters Risk and Business Cycles
Gourio, Francois - 2010
shocks to aggregate uncertainty, I introduce a small, time-varying risk of economic disaster in a standard real business … risk of disaster does not affect the path of macroeconomic aggregates - a "separation theorem" between macroeconomic … variation in risk premia over time, are observationally equivalent to preference shocks. An increase in the perceived …
Persistent link: https://www.econbiz.de/10013150731
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Uncertainty in Environmental Economics
Pindyck, Robert S. - 2007
In a world of certainty, the design of environmental policy is relatively straightforward, and boils down to maximizing the present value of the flow of social benefits minus costs. But the real world is one of considerable uncertainty -- over the physical and ecological impact of pollution,...
Persistent link: https://www.econbiz.de/10012778137
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Heterogeneous Households Under Uncertainty
Veronesi, Pietro - 2019
I characterize a dynamic economy under general distributions of households' risk tolerance, endowments, and beliefs … consumption-share increases; (b) the wealth-share of high risk-tolerant households increases; (c) richer households' wealth … risk sharing. Higher uncertainty increases stock prices, risk premiums, volatility, wealth inequality and the dispersion of …
Persistent link: https://www.econbiz.de/10012894994
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Cognitive Uncertainty
Enke, Benjamin - 2019
explain a set of behavioral anomalies identified across four distinct domains of decision-making: choice under risk, choice … risk and ambiguity, belief updating, and survey expectations. Our framework makes predictions that we test using exogenous …
Persistent link: https://www.econbiz.de/10012858403