Beliefs and the net worth trap

• 成果类型: Article
• 署名作者: Gopalakrishna, Goutham; Lee, Seung Joo; Papamichalis, Theofanis
• 署名单位: University of Toronto; University of Oxford; University of Cambridge
• 刊物名称: JOURNAL OF ECONOMIC THEORY
• ISSN/ISSBN: 0022-0531
• DOI: 10.1016/j.jet.2025.106033
• 发表日期: 2025
• 关键词: Heterogeneous beliefs; Net worth trap; Return dynamics

摘要

We develop a tractable framework to explore how beliefs about long-term economic growth shape macroeconomic and financial stability. By modeling belief distortions among productive capital users, we provide an analytical characterization of a novel phenomenon termed the net worth trap, wherein overly optimistic or pessimistic beliefs among productive agents prevent them from rebuilding wealth, causing permanent inefficiencies. A procyclical swing in beliefs reduces or exacerbates the instability, indicating that the type of belief when the economy is vulnerable has important consequences on financial stability and macroeconomic dynamics.