learning

Financial Innovation, the Discovery of Risk, and the U.S. Credit Crisis

JEL codes: 
D82, E44, F41
Version Date: 
Jul 2010
Author/s: 
Abstract: 

Uncertainty about the riskiness of a new financial environment was an important factor behind the U.S. credit crisis. We show that a boom-bust cycle in debt, asset prices and consumption characterizes the equilibrium dynamics of a model with a collateral constraint in which agents learn "by observation" the true riskiness of the new environment.

Report file: 
PDF icon Download the paper (374.01 KB)

Inflation Scares and Forecast-Based Monetary Policy

JEL codes: 
E52
Version Date: 
Dec 2004
Author/s: 
Abstract: 

Central bankers frequently emphasize the critical importance of anchoring private inflation expectations for successful monetary policy and macroeconomic stabilization. In most monetary policy models, however, expectations are already anchored through the assumption of rational expectations and perfect knowledge of the economy.

Report file: 
PDF icon Download the paper (241.1 KB)