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SUMMARY:Real Credit Cycles
DTSTART:20240419T114500
DTEND:20240419T130000
DTSTAMP:20260407T163703Z
UID:9790f13f8d73849406e844fe4858599f038b4d4218b1aa0cf58c63e2
CATEGORIES:Conferences - Seminars
DESCRIPTION:Stephen Terry - The University of Michigan\nWe incorporate dia
 gnostic expectations into a workhorse neoclassical business cycle model wi
 th heterogeneous firms and risky debt. A realistic degree of diagnostic ov
 erreaction estimated from US firm forecasts generates economic fragility d
 uring good times\, countercyclical credit spreads\, and boom-bust credit c
 ycles at the firm and aggregate levels. Good times predict future disappoi
 ntment\, spread increases\, low bond returns\, and investment declines. To
  generate the size of spread increases observed during 2008-9\, the model 
 requires only disappointment of overoptimistic beliefs rather than large n
 egative shocks. Diagnostic expectations offer a realistic\, parsimonious w
 ay to produce financial reversals in business cycle models.\n 
LOCATION:UniL Campus\, Room Extra 126
STATUS:CONFIRMED
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