Related papers: Monetary Policy, Uncertainty, and Credit Supply
Central banks rely on density forecasts from professional surveys to assess inflation risks and communicate uncertainty. A central challenge in using these surveys is irregular participation: forecasters enter and exit, skip rounds, and…
We consider a dynamical model of distress propagation on complex networks, which we apply to the study of financial contagion in networks of banks connected to each other by direct exposures. The model that we consider is an extension of…
Measurement and management of credit concentration risk is critical for banks and relevant for micro-prudential requirements. While several methods exist for measuring credit concentration risk within institutions, the systemic effect of…
In both finance and economics, quantitative models are usually studied as isolated mathematical objects --- most often defined by very strong simplifying assumptions concerning rationality, efficiency and the existence of disequilibrium…
We study the societal impact of pseudo-scientific assumptions for predicting the behavior of people in a straightforward application of machine learning to risk prediction in financial lending. This use case also exemplifies the impact of…
In this work we propose a statistical approach to handling sources of theoretical uncertainty in string theory models of inflation. By viewing a model of inflation as a probabilistic graph, we show that there is an inevitable information…
Empirical evidence suggests that the rich have higher propensity to save than do the poor. While this observation may appear to contradict the homotheticity of preferences, we theoretically show that that is not the case. Specifically, we…
Studies of micro-level price datasets find more frequent small price increases than decreases, which can be explained by consumer inattention because time-constrained shoppers might ignore small price changes. Recent empirical studies of…
Bayesian hierarchical models are a methodology for aggregation and synthesis of data from heterogeneous settings, used widely in statistics and other disciplines. I apply this framework to the evidence from 7 randomized experiments of…
We are interested in the effect of consumer demand estimation error for new products in the context of production planning. An inventory model is proposed, whereby demand is influenced by price and advertising. The effect of parameter…
We consider a dynamic model of interconnected banks. New banks can emerge, and existing banks can default, creating a birth-and-death setup. Microscopically, banks evolve as independent geometric Brownian motions. Systemic effects are…
We study the distributional implications of uncertainty shocks by developing a model that links macroeconomic aggregates to the US distribution of earnings and consumption. We find that: initially, the fraction of low-earning workers…
Recent studies have revealed a number of striking dependence patterns in high frequency stock price dynamics characterizing probabilistic interrelation between two consequent price increments x (push) and y (response) as described by the…
We contribute to the understanding of how systemic risk arises in a network of credit-interlinked agents. Motivated by empirical studies we formulate a network model which, despite its simplicity, depicts the nature of interbank markets…
We present a financial market model, characterized by self-organized criticality, that is able to generate endogenously a realistic price dynamics and to reproduce well-known stylized facts. We consider a community of heterogeneous traders,…
This paper studies information asymmetry in an unobservable single-server queueing system. While system managers have knowledge of the true arrival rate, customers may lack this information and instead form arbitrary beliefs. We propose a…
Based on the new type of random walk process called the Potentials of Unbalanced Complex Kinetics (PUCK) model, we theoretically show that the price diffusion in large scales is amplified 2/(2 + b) times, where b is the coefficient of…
This paper evaluates the dynamic response of economic activity to shocks in uncertainty as percieved by agents.The study focuses on the comparison between the perception of economic uncertainty by manufacturers and consumers.Since…
We propose and axiomatize preferences on a product state space in light of uncertainty regarding the dependency of different payoff-relevant factors. Dependence structures allow to decompose probabilities and allow to pin down behavior…
We examine how monetary shocks spread throughout an economic model characterized by sticky prices and general equilibrium, where the pricing strategies of firms are interlinked, fostering a mutually beneficial relationship. In this dynamic…