Trends versus cycles: asymmetric preferences and heterogeneous individual responses

Article Abstract:

Robert E. Lucas' assertion that changes in the trend growth rate are more important than cycles in improving consumers' welfare is criticized. Using prospect theory, an alternative framework to subjective expected utility is developed. This enables a comparative analysis trend and cycles which, using different assumptions concerning preferences and heterogeneity of agents' responses to cyclical perturbations, shows that both are crucial to economic welfare.

Business cycles

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Equilibrium policy with dynamically naive agents

Article Abstract:

A competitive equilibrium model for a two-period-lived overlapping generations monetary economy is developed and its impact on economic welfare investigated. The equilibrium policy is characterized by naive, private agents who set the labor income tax rate and money supply growth rate in their second period of life on a period-by-period basis. Due to these, it is unique and may either be Pareto undominated or Pareto dominated.

Equilibrium (Economics)

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Information-based bank runs in a monetary economy

Article Abstract:

A model on information-based bank runs between 1929 and 1933 finds that bank runs cause concurrent deflation and that deflation increases with the magnitude of bank runs. The version of Jacklin and Bhattacharya's model also show that banks suspend withdrawals partially once they recognize the occurrence of a bank run and that banks may have to call potentially productive loans to finance withdrawals.

Banking Institutions, Depository Credit Intermediation, DEPOSITORY INSTITUTIONS, Banking industry, Analysis, Economic aspects, Banks (Finance), Money demand, Bank runs

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