Endogenous Credit Cycles, Heterogeneous Expectations and Sustainable Economic Development


Type Research Project

Funding Bodies
  • Oesterreichische Nationalbank (Jubiläumsfonds)

Duration Jan. 1, 2016 - Dec. 31, 2019

  • Department of Economics DP (Details)
  • Institute for International Economics and Development IN (Details)

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Abstract (English)

We propose a number of interesting extensions to Matsuyama's (2013, 2015) model of endogenous credit cycles, that improve our understanding of the linkages between stable macroeconomic development, economic growth and financial stability. The original model framework is an OLG-setting with heterogeneous investment projects, which have different propensities to generate pecuniary externalities, coupled with credit market imperfections, eventually causing irregular endogenous cyclicity. We plan to augment the model with different expectational regimes, explicitly substituting the assumption of agent's perfect foresight with different expectation hypotheses, using a learning-to-forecast approach. Further, we plan to introduce technological progress into the existing framework, to highlight the interplay of the financial cycle with growth. Finally, we aim to make the model more apt for quantitative analysis and policy design, ultimately bringing the model to the European (Austrian) data. Our results are expected to contribute significantly to the policy discussion on sustainable economic development strategies especially for endogenously unstable financial markets.

Publications

Journal article

2019 Kubin, Ingrid, Zörner, Thomas, Gardini, Laura, Commendatore, Pasquale. 2019. A credit cycle model with market sentiments. Structural Change and Economic Dynamics. 50 159-174. (Details)
  Kubin, Ingrid, Zörner, Thomas. 2019. Credit Cycles, Human Capital and the Distribution of Income. Journal of Economic Behavior and Organization. (Details)

Paper presented at an academic conference or symposium

2019 Zörner, Thomas. 2019. The Impact of Credit Market Sentiment Shocks: A TVAR approach. 11th NED (Conference on Nonlinear Economic Dynamics), Kiew, Ukraine, 04.09.-06.09. (Details)
2018 Zörner, Thomas. 2018. Equilibrium credit growth in the Euro area: A non-linear model approach. Annual Meeting of the Austrian Economic Association (NOeG), Vienna, Österreich, 11.05-12.05. (Details)
  Zörner, Thomas. 2018. Equilibrium credit growth in the Euro area: A non-linear model approach. 5th International Symposium in Computational Economics and Finance (ISCEF), Paris, Frankreich, 12.04-17.04. (Details)
  Zörner, Thomas. 2018. Financial Frictions, credit market sentiment, and the role of perception adjustments. 10th Dynamic Models in Economics and Finance Workshop (MDEF), Urbino, Italien, 06.09.-08.09. (Details)
2017 Zörner, Thomas. 2017. Endogenous Expectations of Financial Frictions in a Credit Cycle Model. 10th NED (Conference on Nonlinear Economic Dynamics), Pisa, Italien, 07.09-09.09. (Details)
  Zörner, Thomas. 2017. Equilibrium credit growth in the euro area: A non-linear model approach. 11th CFE (International Conference on Computational and Financial Econometrics), London, Großbritannien, 16.12-18.12. Invited Talk (Details)
  Zörner, Thomas. 2017. Human Capital in a Credit Cycle Model. 21st Annual International Conference on Macroeconomic Analysis and Finance, Kreta, Griechenland, 25.05.-27.05. (Details)
  Kubin, Ingrid, Zörner, Thomas. 2017. Human capital in a credit cycle model. 10th NED Conference - 1st CICSE workshop, Pisa, Italien, 07.09.-09.09. (Details)
2016 Kubin, Ingrid, Zörner, Thomas. 2016. Human Capital in a Credit Cycle Model. 9th MDEF (Dynamic Models in Economics and Finance), Urbino, Italien, 04.06.2016. (Details)

Working/discussion paper, preprint

2019 Böck, Maximilian, Zörner, Thomas. 2019. The Impact of Credit Market Sentiment Shocks – A TVAR Approach. WU Economics Working Paper Series, No. 288. (Details)
2017 Kubin, Ingrid, Zörner, Thomas. 2017. Human Capital in a Credit Cycle Model. WU Economics Working Paper Series, No. 251. (Details)