Author: Gustavo Rojas-Matute
Publisher:
ISBN:
Category : Business enterprises
Languages : en
Pages : 95
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Book Description
How firms set their prices is of special importance in macroeconomics and, in particular, for monetary policy. This dissertation investigates price-setting behavior from two different perspectives and two different environments, from low inflation to hyperinflation.In Chapter 1, I point out that firms seem to pay more attention to GDP growth rates in economies with well-anchored inflation expectations than CPI inflation. I study how this heterogeneity affects price-setting behavior. I analyze three types of firms: those that only track GDP, those that only track CPI, and those that track both. The findings can be summarized as follows: (i) both GDP growth rate and CPI inflation expectations affect price-setting behavior but in opposite directions; (ii) the impact of long-run inflation expectations on price-setting behavior is more substantial than short-run expectations; (iii) in the presence of adjustment costs, the frequency of price changes of those firms that only track GDP growth rate is highly correlated with the series estimated by Nakamura et al., (2018) with data provided by the Bureau of Labor Statistics (BLS); (iv) in the short run, the output response to a monetary shock is larger while the price response is smaller in those firms that only track GDP growth rate than in those firms that only update CPI; (v) adjustment costs amplify monetary non-neutrality in only-GDP firms. If the aggregate effect is driven by ``only-GDP" firms, as suggested in (iii), the results are consistent with recent findings suggesting that the Phillips curve is flat (Del Negro et al., 2020, Hazell et al., 2020).In Chapter 2, I take advantage of a ``natural experiment" to study the impact of the lack of official information on price-setting behavior. In particular, I study a case between December 2015 and May 2019, when the Central Bank of Venezuela stopped releasing official economic statistics, including inflation rate, GDP, and balance of payments. Using a combination of data sets from the Billion Prices Project, I find that the lack of official information increases the size of price changes (intensive margin), leading the intensive margin to be the main driver of the variance of the inflation. The empirical results are confirmed with the calibration of a price-setting behavior model. The model suggests that the turning point occurred when the Central Bank started delaying the publications (2012-2014) before deciding to stop them entirely in 2015. These findings are groundbreaking because they occur in a context of hyperinflation where prices change very frequently and differ from the most recent literature that has shown that the extensive margin contributes the most during high inflation and hyperinflation (Alvarez et al., 2019, Gagnon, 2009). The evidence also suggests that, despite the surge of different non-official inflation indicators publicly available, firms rely on private sources.
Author: Cars Hommes
Publisher: Cambridge University Press
ISBN: 110701929X
Category : Business & Economics
Languages : en
Pages : 273
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Book Description
Recognising that the economy is a complex system with boundedly rational interacting agents, applies complexity modelling to economics and finance.
Author: David M. Ritzwoller
Publisher:
ISBN:
Category : Economics
Languages : fr
Pages : 140
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Book Description
Newly available panel data on investor expectations of future returns to the stock market suggest that (1) there is a large degree of heterogeneity in the ways that investors form beliefs about future stock market returns, that (2) investors frequently change the ways that they form their beliefs, that (3) investor's decisions to change the way that they form beliefs are influences by changes in market behavior, and that (4) adaptation in the ways that investors form beliefs significantly effect aggregate price dynamics. First, I reproduce, refine, and substantially expand a nonparametric procedure initially developed in Dominitz and Manski (2011) to classify investor expectations into three "expectation-types" based on how investors revise their expectations for returns relative to the change in recent returns. I find that there is substantial heterogeneity in expectation-types and frequent adaptation between expectation-types. Second, I show that the probability of transitioning to a different expectation-type is significantly correlated with the size and sign of the change in recent returns, indicating that the decision to adapt to a different expectation-type is influenced by recent market behavior. Third, I develop a simple, stylized, agent-based model of adaptation of expectation-types and argue that adaptive behavior can significantly influence aggregate price dynamics in ways consistent with observed stock market behavior.
Author: Peter J. N. Sinclair
Publisher: Routledge
ISBN: 1135179778
Category : Business & Economics
Languages : en
Pages : 402
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Book Description
Inflation is regarded by the many as a menace that damages business and can only make life worse for households. Keeping it low depends critically on ensuring that firms and workers expect it to be low. So expectations of inflation are a key influence on national economic welfare. This collection pulls together a galaxy of world experts (including Roy Batchelor, Richard Curtin and Staffan Linden) on inflation expectations to debate different aspects of the issues involved. The main focus of the volume is on likely inflation developments. A number of factors have led practitioners and academic observers of monetary policy to place increasing emphasis recently on inflation expectations. One is the spread of inflation targeting, invented in New Zealand over 15 years ago, but now encompassing many important economies including Brazil, Canada, Israel and Great Britain. Even more significantly, the European Central Bank, the Bank of Japan and the United States Federal Bank are the leading members of another group of monetary institutions all considering or implementing moves in the same direction. A second is the large reduction in actual inflation that has been observed in most countries over the past decade or so. These considerations underscore the critical – and largely underrecognized - importance of inflation expectations. They emphasize the importance of the issues, and the great need for a volume that offers a clear, systematic treatment of them. This book, under the steely editorship of Peter Sinclair, should prove very important for policy makers and monetary economists alike.
Author: Richard Thomas Curtin
Publisher: Cambridge University Press
ISBN: 1107004691
Category : Business & Economics
Languages : en
Pages : 365
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Book Description
Proposes a new comprehensive theory about how expectations are formed and how they shape the macro economy.
Author: Domenico Delli Gatti
Publisher: Springer Science & Business Media
ISBN: 3642570054
Category : Business & Economics
Languages : en
Pages : 302
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Book Description
This book is a collection of essays which examine how the properties of aggregate variables are influenced by the actions and interactions of heterogenous individuals in different economic contexts. The common denominator of the essays is a critique of the representative agent hypothesis. If this hypothesis were correct, the behaviour of the aggregate variable would simply be the reproduction of individual optimising behaviour. In the methodology of the hard sciences, one of the achievements of the quantum revolution has been the rebuttal of the notion that aggregate behaviour can be explained on the basis of the behaviour of a single unit: the elementary particle does not even exist as a single entity but as a network, a system of interacting units. In this book, new tracks in economics which parallel the developments in physics mentioned above are explored. The essays, in fact are contributions to the analysis of the economy as a complex evolving system of interacting agents.
Author: Ian Ayres
Publisher: ReadHowYouWant.com
ISBN: 1458758427
Category : Business & Economics
Languages : en
Pages : 358
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Book Description
Diversification provides a well-known way of getting something close to a free lunch: by spreading money across different kinds of investments, investors can earn the same return with lower risk (or a much higher return for the same amount of risk). This strategy, introduced nearly fifty years ago, led to such strategies as index funds. What if we were all missing out on another free lunch that’s right under our noses? InLifecycle Investing, Barry Nalebuff and Ian Ayres-two of the most innovative thinkers in business, law, and economics-have developed tools that will allow nearly any investor to diversify their portfolios over time. By using leveraging when young-a controversial idea that sparked hate mail when the authors first floated it in the pages ofForbes-investors of all stripes, from those just starting to plan to those getting ready to retire, can substantially reduce overall risk while improving their returns. InLifecycle Investing, readers will learn How to figure out the level of exposure and leverage that’s right foryou How the Lifecycle Investing strategy would have performed in the historical market Why it will work even if everyone does it Whennotto adopt the Lifecycle Investing strategy Clearly written and backed by rigorous research,Lifecycle Investingpresents a simple but radical idea that will shake up how we think about retirement investing even as it provides a healthier nest egg in a nicely feathered nest.
Author: Mark Gertler
Publisher: Mit Press
ISBN: 9780262072533
Category : Business & Economics
Languages : en
Pages : 432
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Book Description
The NBER Macroeconomics Annual presents pioneering work in macroeconomics by leading academic researchers to an audience of public policymakers and the academic community. Each commissioned paper is followed by comments and discussion. This year's edition provides a mix of cutting-edge research and policy analysis on such topics as productivity and information technology, the increase in wealth inequality, behavioral economics, and inflation.
Author: Paul De Grauwe
Publisher:
ISBN: 019883232X
Category : Macroeconomics
Languages : en
Pages : 273
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Book Description
Modern macroeconomics has been based on the paradigm of the rational individual capable of understanding the complexity of the world. This has created a very shallow theory of the business cycle in which nothing happens in the macroeconomy unless shocks occur from outside. Behavioural Macroeconomics: Theory and Policy uses a different paradigm. It assumes that individual agents experience cognitive limitations preventing them from having rational expectations. Instead these individuals use simple rules of behaviour. Behavioural Macroeconomics introduces rationality by allowing individuals to learn from their mistakes and to switch to the rules that perform better. It introduces the idea of endogenously generated "animals spirits" that drive the business cycle and are in turn influenced by it, and applies this model to shed new light on a number of important issues. It analyses the role of fiscal policy in stabilizing the economy while maintaining debt sustainability; expands the model to include a banking sector and show how banks amplify the booms and busts; and explains how animal spirits help to synchronize the business cycles across countries. The model set out in Behavioural Macroeconomics leads to very different policy implications from the mainstream macroeconomic model. It shows how policymakers have a responsibility to stabilize an otherwise unstable system.
Author: Kenneth Gibb
Publisher: Taylor & Francis
ISBN: 1003834876
Category : Architecture
Languages : en
Pages : 351
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Book Description
The Routledge Handbook of Housing Economics brings together an international panel of contributors to present a comprehensive overview of this important field within economics. Housing occupies an increasingly central role in modern society, dominating consumer assets and spending, forming an important part of social policy and being a large enough market to impact the macroeconomy. This handbook tackles these themes, along with other critical issues such as intergenerational housing inequality and the efficiency and social justice of housing interventions. This volume is structured in four main parts. It starts with eight chapters in microeconomics and housing. This is followed by two shorter sections on macroeconomics and finance. The final main part of the book is concerned with eight chapters on policy dimensions. While many of the chapters are rooted in mainstream economics and finance applied to housing, there are also chapters stressing institutional, behavioural and political economy orientations, as well as those that explicitly challenge more mainstream accounts. The contributing authors are based in Europe, North America and Australia and all draw in international literature to provide state of the art reviews of their topics. This carefully curated handbook will be essential reading for advanced students, researchers and policy makers in housing economics, urban economics, urban planning, public economics and real estate economics and finance. Chapter 22 of this book is freely available as a downloadable Open Access PDF at http://www.taylorfrancis.com under a Creative Commons Attribution-Non Commercial-No Derivatives (CC-BY-NC-ND) 4.0 license.
