The International Synchronisation of Business Cycles: the Role of Animal Spirits

Ji, Yuemei

doi:10.1007/s11079-017-9434-3

Cited by 30 publications

(14 citation statements)

References 42 publications

(32 reference statements)

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“…We have attempted to go further and to explain the international synchronization of business cycles endogenously (see De Grauwe and Ji(2017)).…”

Section: Animal Spirits and Synchronization Of Business Cyclesmentioning

confidence: 99%

Behavioural Economics is Useful Also in Macroeconomics: The Role of Animal Spirits

2018

Comp Econ Stud

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Dynamic Stochastic General Equilibrium models are still dominant in mainstream macroeconomics, but they are only able to explain business cycle fluctuations as the result of exogenous shocks. This paper uses concepts from behavioural economics and discusses a New Keynesian macroeconomic model that generates endogenous business cycle fluctuations driven by animal spirits. Our discussion includes two applications. One is on the optimal level of inflation targeting under a zero lower bound (ZLB) constraint. The other is on the role of animal spirits in explaining the synchronization of business cycles across countries.

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“…We have attempted to go further and to explain the international synchronization of business cycles endogenously (see De Grauwe and Ji(2017)).…”

Section: Animal Spirits and Synchronization Of Business Cyclesmentioning

confidence: 99%

Behavioural Economics is Useful Also in Macroeconomics: The Role of Animal Spirits

2018

Comp Econ Stud

Self Cite

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“…This paper differs from the existing literature in the following ways. A major difference from the existing literature analyzing currency unions without assuming full rationality ( Torój, 2010, De Grauwe and Ji, 2017, Kobielarz, 2017, and Bonam and Goy, 2019 is that all of the existing models are two-country models, while ours is a multi-country model. In addition, there are various other differences to this existing literature.…”

Section: Introductionmentioning

confidence: 96%

“…This contradicts common sense, as well as a great deal of economic and psychological evidence that humans are not fully rational (accumulated at least since Tversky and Kahneman, 1974 ). While many scholars have already taken non-rational expectations in account when modeling closed economies (e.g., Evans and Honkapohja, 2006, Branch and McGough, 2009, Branch and McGough, 2010, De Grauwe, 2010De Grauwe, 2011;De Grauwe, 2012a;De Grauwe, 2012b, Branch and Evans, 2011, Kurz et al, 2013, Massaro, 2013, Pfajfar and Zakelj, 2014, international macroeconomics still focuses almost exclusively on rational expectations (notable exceptions providing two-country models with deviations from rational expectations are Torój, 2010, De Grauwe and Ji, 2017, Kobielarz, 2017, and Bonam and Goy, 2019.…”

Section: Introductionmentioning

confidence: 99%

The Behavioral Economics of Currency Unions: Economic Integration and Monetary Policy

Bertasiute¹,

Massaro

Weber

2019

SSRN Journal

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We analyze different behavioral models of expectation formation in a multi-country New Keynesian currency union model. Our analyses yield the following robust results. First, economic integration is of crucial importance for the stability of the economic dynamics in a currency union. Second, when the economic dynamics are unstable, more activist monetary policy does not lead to stable economic dynamics. These findings have natural counterparts in the rational expectations version of the model: there, economic integration is crucial for the determinacy of the equilibrium and when the equilibrium is indeterminate, more activist monetary policy does not lead to a determinate equilibrium. In an application to euro area data, we find that the behavioral macroeconomic model outperforms its rational counterpart in terms of prediction performance.

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“…( 2012 ), the discussion of this problem led to the development of a few “metacriteria” that implicitly subsume some of the individual conditions; the synchronization of business cycles has been established as a key metacriterion [(e.g., De Haan et al. ( 2008 ) and De Grauwe and Ji ( 2016 , 2017 )].…”

Section: Introductionmentioning

confidence: 99%

Purchase of government bonds by a supranational central bank: its impact on business cycles

Nakao

Asada

2021

Evolut Inst Econ Rev

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The euro area emerged from the euro crisis without meeting the conditions presented by the theory of optimum currency area. The decisive policy that ended this crisis was the Outright Monetary Transactions policy. Besides, the quantitative easing policy supports the economy of the euro area after this crisis. To examine the impact of these supranational monetary policies on the business cycles in the euro area, which is not covered by optimum currency area theory, we use a Kaldorian two-country model featuring a monetary union and imperfect capital mobility. We find that an increase in government bond purchases is a stabilizing factor, whereas an extreme increase in the degree of counter-cyclical fiscal policy is a destabilizing factor. Nevertheless, as long as the fiscal and monetary policies of two countries are not extremely active, but active to a certain extent, the equilibrium point becomes locally stable. Furthermore, even if the business cycles are not synchronized, the purchase of government bonds of a particular country is effective in stabilizing the business cycles of both countries. From these results, we suggest that the euro area satisfies the metacriteria of an optimum currency area through the implementation of a government bond purchase system by a supranational central bank system.

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The International Synchronisation of Business Cycles: the Role of Animal Spirits

Cited by 30 publications

References 42 publications

Behavioural Economics is Useful Also in Macroeconomics: The Role of Animal Spirits

Behavioural Economics is Useful Also in Macroeconomics: The Role of Animal Spirits

The Behavioral Economics of Currency Unions: Economic Integration and Monetary Policy

Purchase of government bonds by a supranational central bank: its impact on business cycles

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