Endogenously-Timed Herding And The Synchronization Of Investment Cycles

Bernd Süssmuth

Discussion Papers in Economics from University of Munich, Department of Economics

Abstract: This paper combines the recent garne theoretic approach of endogenous timing of entry to herding models with a rnacroeconornic model of investrnent cycles. The integrated description embodies the qualitative resuits of the rnyopic herding model in a medium run investment objective of smooth ing the capital stock adjustment process. lt features a completely disaggregated structure and bears the potential to synchronize individual cyclic investing be haviors. This synchronization via nonlinear feedback from the aggregate ac tivity can serve as an explanation of the inexistent cancelling of heterogeneous sectoral quasi-cycles. The model others an explanatory base for the constitu tion of the observed strong cyclicality of the aggregate investment series by a multitude of different periodicities and phases on the individual level. Finally, based on recent ndings of the herding literature, the stabilization potential of third parties' information revelation is conjectured.

Keywords: herding; investment cycles; nonlinear entrainment (search for similar items in EconPapers)
JEL-codes: D81 D83 E22 E32 (search for similar items in EconPapers)
Date: 2000-05
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Citations: View citations in EconPapers (1)

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