EconPapers    
Economics at your fingertips  
 

The Role of Learning for Asset Prices and Business Cycles

Fabian Winkler ()

No 2016-019, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (US)

Abstract: I examine the implications of learning-based asset pricing in a model in which firms face credit constraints that depend partly on their market value. Agents learn about stock prices, but have conditionally model-consistent expectations otherwise. The model jointly matches key asset price and business cycle statistics, while the combination of financial frictions and learning produces powerful feedback between asset prices and real activity, adding substantial amplification. The model reproduces many patterns of forecast error predictability in survey data that are inconsistent with rational expectations. A reaction of the monetary policy rule to asset price growth increases welfare under learning.

Keywords: Asset Pricing; Credit Constraints; Expectations; Financial Frictions; Learning; Monetary policy; Survey Data; Survey Forecasts (search for similar items in EconPapers)
JEL-codes: D83 E32 E44 E52 G12 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge and nep-mac
Date: 2016-01-20, Revised 2017-03-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4) Track citations by RSS feed

Downloads: (external link)
https://www.federalreserve.gov/econres/feds/files/2016019r1pap.pdf Full text (Revision) (application/pdf)
https://www.federalreserve.gov/econresdata/feds/2016/files/2016019pap.pdf Full text (Original) (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:2016-19

Ordering information: This working paper can be ordered from
http://www.federalre ... /feds/fedsorder.html

DOI: 10.17016/FEDS.2016.019r1

Access Statistics for this paper

More papers in Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (US) Contact information at EDIRC.
Bibliographic data for series maintained by Ryan Wolfslayer ().

 
Page updated 2019-10-16
Handle: RePEc:fip:fedgfe:2016-19