A RISK-CENTRIC MODEL OF DEMAND RECESSIONS AND SPECULATION

• 成果类型: Article
• 署名作者: Caballero, Ricardo J.; Simsek, Alp
• 署名单位: Massachusetts Institute of Technology (MIT); National Bureau of Economic Research; Center for Economic & Policy Research (CEPR)
• 刊物名称: QUARTERLY JOURNAL OF ECONOMICS
• ISSN/ISSBN: 0033-5533
• DOI: 10.1093/qje/qjaa008
• 发表日期: 2020
• 页码: 1493-1566
• 关键词: Uncertainty shocks; stock-market; asset; liquidity; beliefs; POLICY; news

摘要

We provide a continuous-time risk-centric representation of the New Keynesian model, which we use to analyze the interactions between asset prices, financial speculation, and macroeconomic outcomes when output is determined by aggregate demand. In principle, interest rate policy is highly effective in dealing with shocks to asset valuations. However, in practice monetary policy faces a wide range of constraints. If these constraints are severe, a decline in risky asset valuations generates a demand recession. This reduces earnings and generates a negative feedback loop between asset prices and aggregate demand. In the recession phase, average beliefs matter because they not only affect asset valuations but also determine the strength of the amplification mechanism. In the ex ante boom phase, belief disagreements (or heterogeneous asset valuations) matter because they induce investors to speculate. This speculation exacerbates the crash by reducing high-valuation investors' wealth when the economy transitions to recession, which depresses (wealth-weighted) average beliefs. Macroprudential policy that restricts speculation in the boom can Pareto improve welfare by increasing asset prices and aggregate demand in the recession.