 Learning about banks’ net worth and the slow recovery after the financial crisisJosef Hollmayr and Michael Kühl () Journal of Economic Dynamics and Control, 2019, vol. 109, issue C Abstract: We examine the influence of information rigidities about the net worth of banks on the real economy over time. In a first part, we show empirically that expectations about the net earnings of banks (as a proxy for the growth of net worth) are biased, particularly during the financial crisis. Investors display a learning behavior in forming expectations about future bank earnings during the crisis. In a second part, by drawing on a New Keynesian general equilibrium model with a banking sector, we demonstrate that, by quantitatively incorporating this type of information updating and expectations formation about the net worth of banks, noisy information is able to produce a slow recovery in the aftermath of the financial crisis and match the data more closely than in the full information rational expectation (FIRE) case. Keywords: DSGE Model; Survey data; Imperfect information; Learning; Slow recovery (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:109:y:2019:i:c:s0165188919301733 DOI: 10.1016/j.jedc.2019.103776 Access Statistics for this article Journal of Economic Dynamics and Control is currently edited by J. Bullard, C. Chiarella, H. Dawid, C. H. Hommes, P. Klein and C. Otrok More articles in Journal of Economic Dynamics and Control from Elsevier |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.