Imperfect Information, Financial Frictions, and Consequences for the Business Cycle
In this paper, we discuss the consequences of imperfect information about financial frictions on the macroeconomy. Therefore we introduce uncertainty in the banking model of Gertler and Karadi (JME, 2011). Bank mangers can increase the share of diversion which can only be imperfectly observed by depositors. Agents need to learn about the new behavior of bankers. Our results show that the business cycle is amplified under imperfect information compared to the rational expectations baseline. It also exhibits a considerable higher volatility.
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20.11.2014 | 17:00 c.t.
Kaminzimmer (Raum 202), Boltzmannstraße 20, Berlin-Dahlem