Adverse selection and self-fulfilling business cycles

• 成果类型: Article
• 署名作者: Benhabib, Jess; Dong, Feng; Wang, Pengfei
• 署名单位: Shanghai Jiao Tong University; Hong Kong University of Science & Technology
• 刊物名称: JOURNAL OF MONETARY ECONOMICS
• ISSN/ISSBN: 0304-3932
• DOI: 10.1016/j.jmoneco.2017.12.003
• 发表日期: 2018
• 页码: 114-130
• 关键词: Adverse selection; Local indeterminacy; global dynamics; sunspots

摘要

This paper introduces a simple adverse selection problem arising in credit markets into a standard textbook continuous-time real business cycle model. Such adverse selection generates multiple steady states and both local and global indeterminacy, and can give rise to equilibria with probabilistic jumps in credit, consumption, investment and employment driven by Markov sunspots under calibrated parameterizations and fully rational expectations. Introducing reputational effects eliminates defaults and results in a unique but still indeterminate steady state. Finally we generalize the model to firms with heterogeneous and stochastic productivity, and show that indeterminacies and sunspots persist. (C) 2018 Elsevier B.V. All rights reserved.