The Tail That Wags the Economy: Beliefs and Persistent Stagnation

• 成果类型: Article
• 署名作者: Kozlowski, Julian; Veldkamp, Laura; Venkateswaran, Venky
• 署名单位: Center for Economic & Policy Research (CEPR); Columbia University; National Bureau of Economic Research; New York University; National Bureau of Economic Research
• 刊物名称: JOURNAL OF POLITICAL ECONOMY
• ISSN/ISSBN: 0022-3808
• DOI: 10.1086/707735
• 发表日期: 2020
• 页码: 2839-2879
• 关键词: business; MODEL; RISK

摘要

The Great Recession was a deep downturn with long-lasting effects on credit, employment, and output. While narratives about its causes abound, the persistence of gross domestic product below precrisis trends remains puzzling. We propose a simple persistence mechanism that can be quantified and combined with existing models. Our key premise is that agents do not know the true distribution of shocks but use data to estimate it nonparametrically. Then, transitory events, especially extreme ones, generate persistent changes in beliefs and macro outcomes. Embedding this mechanism in a neoclassical model, we find that it endogenously generates persistent drops in economic activity after tail events.