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1.
It is demonstrated that adaptive learning in the least squares sense may be incapable of satisfactorily reducing the number of attainable equilibria in a rational expectations model when focusing on the forward‐solutions to the model. The model examined, as an illustration, is a basic asset pricing model for exchange rate determination that is augmented with technical trading in the currency market in the form of moving averages since it is the most commonly used technique according to questionnaire surveys. The forward‐solutions to such a model are preferable to the backward‐solutions that are normally utilized since announcement effects is an important feature in currency trade. Because of technical trading in foreign exchange, the current exchange rate depends on j max lags of the exchange rate, meaning that the model has j max+1 rational expectations equilibria, where several of them are adaptively learnable in the least squares sense. However, since past exchange rates should not affect the current exchange rate when technical trading is absent, it is possible to single out a unique equilibrium among the adaptively learnable equilibria that is economically meaningful. It is worth noting that the model examined can also be viewed as a model for stock price determination in which the forward‐solutions to the model are preferable to the backward‐solutions since the importance of announcement effects is a common characteristic for currency and stock markets.  相似文献   

2.
I study rollover risk in wholesale funding markets when intermediaries hold liquidity ex ante and fire sales may occur ex post. Multiple equilibria exist in a global rollover game: intermediate liquidity holdings support equilibria with both positive and zero expected liquidation. A simple uniqueness refinement pins down the private liquidity choice, which balances the forgone expected return on investment with reduced fragility and costly liquidation. Due to fire sales, liquidity holdings are strategic substitutes. Intermediaries free ride on the holdings of other intermediaries, causing excessive liquidation. To internalize the systemic nature of liquidity, a macroprudential authority imposes liquidity buffers.  相似文献   

3.
This paper explores the tension between asset quality and market liquidity. I model an originator who screens assets whose cash flows are later sold in secondary markets. Screening improves asset quality but gives rise to asymmetric information, hindering trade of the asset cash flows. In the optimal mechanism (second‐best), costly retention of cash flows is essential to implement asset screening. Market allocations can feature too much or too little screening relative to second‐best, where too much screening generates inefficiently illiquid markets. Furthermore, the economy is prone to multiple equilibria. The optimal mechanism is decentralized with two tools: retention rules and transfers.  相似文献   

4.
Diversification through a financial intermediary has the benefit of transforming loans that need costly monitoring into bank deposits that do not. We show that financial intermediation in a costly state verification model has a cost not yet analyzed: it allows for the existence of multiple equilibria, some of which are characterized by borrowers defaulting on their loans because they expect other borrowers to do the same (i.e. bad equilibria arise due to strategic complementarities in entrepreneurs’ actions). We propose two mechanisms that fully implement the desired equilibrium allocation.  相似文献   

5.
The so-called disclosure principle is a 'puzzle' in the accounting literature: Game theoretic models of financial markets show that in equilibrium firms should disclose all their private information. Yet, the result is not convincing. Researchers have therefore built sophisticated models in order to demonstrate for which reasons the disclosure principle might fail. This note shows that even in the original model there are multiple equilibria. In those equilibria good types disclose and bad types do not. The commonly known full disclosure equilibrium is a limit point of the equilibrium set.  相似文献   

6.
The recent literature on monetary policy design has emphasized the importance of equilibrium determinacy and learnability in the choice of policy rules. This paper contains an analysis of the learnability of the equilibrium in a class of simple, micro-founded models in which the policy authority uses a Taylor-type monetary policy rule. Unlike previous analyses, the model economy is not linearized about a steady state—instead, a global perspective is adopted. Globally, the nonlinear model economy can possess rational expectations equilibria other than the steady state consistent with the inflation target of the monetary authorities. These include a second, low inflation ‘liquidity trap’ steady state, periodic equilibria, and sunspot equilibria. The main results in the paper characterize the conditions under which these alternative equilibria maybe stable under adaptive learning, even when the policy rule obeys the Taylor principle. The stability of multiple equilibria is associated with policy rules which are forecast-based. An important finding is that backward-looking Taylor-type policy rules can guarantee that the unique learnable equilibrium is the steady state associated with the inflation target of the monetary authority.  相似文献   

7.
This paper analyzes optimal formation of rational expectations where information is costly to obtain to utilize. Under these conditions, expectations normally formed by an estimator will be intermediate between those based on all available information and those which are optimal extrapolative predictors. 1 1 A large literature has grown out of Muth's seminal article 2 which argued that expectations should be consistent with available information. 3 and others have used the techniques of 1 to formulate expectations making use of all the information contained in the past values of the series being predicted.
Since the costs of information are likely to vary less than the value of information, this model can explain systematic differences in expectations in markets, such as, labor, for which the value of accuracy of expectations differs between or among buyers and sellers. Similarly, expectations about the same variable may differ between markets where arbitrage is also costly. Section I extends a model due to Theil toanalyzetheeffectsofcostlyinformation. Illustrative applications are discussed in Section II .  相似文献   

8.
Recent models of monetary policy can have indeterminacy of equilibria, which is often viewed as a difficulty of these models. We consider the significance of indeterminacy using the learning approach to expectations formation. We employ expectational stability as a selection criterion for different equilibria and derive the expectational stability and instability conditions for forward-looking multivariate models, both without and with lags. The results are applied to several monetary policies.  相似文献   

9.
This paper reconciles the two explanations of a financial crisis, the self-fulfilling prophecy and the fundamental causes, in an empirically-relevant framework, by explicitly modeling the costly voluntary acquisition of information about fundamentals in a variant of Diamond and Dybvig [Diamond, D., Dybvig, P., 1983. Bank runs, deposit insurance, and liquidity. Journal of Political Economy 91, 401–419]. The model exhibits strategic complementarity in information acquisition. In the “partial run” equilibrium investors engage in costly evaluation of projects, so that banks with lower-return projects fail. There also exist the classic “full-run” and “no-run” equilibria in which there is no project evaluation. Investors’ coordination on a specific equilibrium is triggered by a self-fulfilling prophecy. So, financial crises are seen as both fundamentals-based and self-fulfilling prophecies-based phenomena.  相似文献   

10.
We find that the likelihood and severity of financial misreporting is positively related to aggregate institutional ownership and this effect can be largely attributed to ownership by institutions with short investment horizons — those with little incentive to engage in costly monitoring of firm activities and precisely those that sell at the announcement of a restatement. We also find that the concentration of holdings by these institutions offsets this effect, which suggests concentrated ownership induces greater monitoring and mitigates the incentives for firms to misreport. Our results suggest that any link between myopic firm decision making and institutional ownership may be related to the nature of institutional monitoring.  相似文献   

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