Research Seminar in Economics by William Branch, Ph.D. (University of California, Irvine)
On Thursday, June 14, noon-14 pm, William Branch, Ph.D. from the University of California, Irvine will be the speaker of the Research Seminar in Economics. He will present his research paper on "Statistical Sunspots" at Kaminzimmer (room 202), Boltzmannstraße 20, Berlin-Dahlem.
This paper shows that belief-driven economic fluctuations are a general feature of many determinate macroeconomic models. Model misspecification can break the link between indeterminacy and sunspots by establishing the existence of "statistical sunspots" in models that have a unique rational expectations equilibrium. Building on the insights of Marcet and Sargent (1989) and Sargent (1991), with some state variables `hidden' to a set of agents the state vector expands to include agents' expectations and, in a restricted perceptions equilibrium, agents form beliefs by projecting the state vector onto their set of observables. This set of observables can include serially correlated non-fundamental factors (e.g. sunspots, judgment, expectations shocks, etc.). Agents attribute, in a self-fulfilling way, some of the serial correlation observed in data to extrinsic noise, i.e. statistical sunspots. This leads to sunspot equilibria in models with a unique rational expectations equilibrium. Unlike rational sunspots, these equilibria are stable under learning. Applications are developed in the context of a New Keynesian, an asset-pricing, and a pure monetary model.
For further information about the Research Seminar in Economics and its program, please click here.
Time & Location
Jun 14, 2018 | 12:15 PM - 01:45 PM