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This article explores the role of trust and confidence in economic life, and their relevance to the current financial … informal and social bases of trust from three key formal mechanisms of economic confidence (information, contract, regulation …
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The outburst of the 2008 global economic crisis sparked a myriad of criticism on mainstream neoclassical economic theory, held responsible for not even have considered the possibility of the kind of collapse that the subprime mortgage meltdown unleashed. In this paper, it is argued that what...
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We present a theoretical framework to characterize how financial market participants contribute to systemic risk, allowing us to derive optimal corrective policy interventions. To that end, we embed belief heterogeneity in a model of frictional financial markets. We document the asymmetry that,...
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effect of wealth shocks on household consumption and individual expectations of the future. Many household experienced a … significant wealth shocks, but these shocks led to modest spending effects and small revisions to expectations regarding future … bequests. Expectations of bequests seem particularly tied to housing wealth. …
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