ArticleProceedings of the National Academy of Sciences of the United States of America2020
Confidence collapse in a multihousehold, self-reflexive DSGE model.
Article in Proceedings of the National Academy of Sciences of the United States of America, 2020. The graph could read no effect estimate from its abstract, so it casts no vote on the map. Cited by 2 papers.
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The abstract states no effect estimate the extractor could read, or names no intervention and outcome on the map, so this paper lights no cell and moves no belief. It is still indexed, cited and linked below.
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Who cites it
2 citing papers in PubMed, 0 citations in OpenAlex.
- Radical Complexity.Entropy (Basel, Switzerland) · 2021Article
- Article
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Authors and funding
4 authors at 3 institutions in 1 country.
Funding
No grant is acknowledged in the PubMed record.
Abstract
We investigate a multihousehold dynamic stochastic general equilibrium (DSGE) model in which past aggregate consumption impacts the confidence, and therefore consumption propensity, of individual households. We find that such a minimal setup is extremely rich and leads to a variety of realistic output dynamics: high output with no crises; high output with increased volatility and deep, short-lived recessions; and alternation of high- and low-output states where a relatively mild drop in economic conditions can lead to a temporary confidence collapse and steep decline in economic activity. The crisis probability depends exponentially on the parameters of the model, which means that markets cannot efficiently price the associated risk premium. We conclude by stressing that within our framework, narratives become an important monetary policy tool that can help steer the economy back on track.
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