Endogenous uncertainty and credit crunches
Straub, Ludwig
Ulbricht, Robert

Data: 2017
Resum: We develop a theory of endogenous uncertainty where the ability of investors to learn about firm-level fundamentals declines during financial crises. At the same time, higher uncertainty reinforces financial distress of firms, giving rise to "belief traps" - a persistent cycle of uncertainty, pessimistic expectations, and financial constraints, through which a temporary shortage of funds can develop into a long-lasting funding problem for firms. At the macro-level, belief traps can explain why financial crises can result in long-lasting recessions. In our model, financial crises are characterized by high levels of credit misallocation, an increased cross-sectional dispersion of growth rates, endogenously increased pessimism, uncertainty and disagreement among investors, highly volatile asset prices, and high risk premia. A calibration of our model to U. S. micro data on investor beliefs explains a considerable fraction of the slow recovery after the 08/09 crisis.
Resum: The ADEMU Working Paper Series is being supported by the European Commission Horizon 2020 European Union funding for Research & Innovation, grant agreement No 649396.
Ajuts: European Commission 649396
Drets: Aquest document està subjecte a una llicència d'ús Creative Commons. Es permet la reproducció total o parcial, la distribució, la comunicació pública de l'obra i la creació d'obres derivades, fins i tot amb finalitats comercials, sempre i quan es reconegui l'autoria de l'obra original. Creative Commons
Llengua: Anglès
Col·lecció: Barcelona Graduate School of Economics. ADEMU working paper series
Col·lecció: ADEMU Working Paper Series ; 65
Document: Working paper
Matèria: Belief traps ; Credit crunches ; Dispersed information ; Endogenous uncertainty ; Internal persistence of financial shocks ; Resource misallocation

Adreça alternativa: https://hdl.handle.net/10230/32772


47 p, 651.6 KB

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 Registre creat el 2018-10-23, darrera modificació el 2022-07-09



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