Article Navigation
- < Previous
- Next >
Journal Article
Get access
, Ricardo J Caballero Massachusetts Institute of Technology and National Bureau of Economic Research Search for other works by this author on: Oxford Academic Alp Simsek Massachusetts Institute of Technology, National Bureau of Economic Research, and Centre for Economic Policy Research Search for other works by this author on: Oxford Academic
The Quarterly Journal of Economics, Volume 135, Issue 3, August 2020, Pages 1493–1566, https://doi.org/10.1093/qje/qjaa008
Published:
13 March 2020
- Views
- Article contents
- Figures & tables
- Video
- Audio
- Supplementary Data
-
Cite
Cite
Ricardo J Caballero, Alp Simsek, A Risk-Centric Model of Demand Recessions and Speculation, The Quarterly Journal of Economics, Volume 135, Issue 3, August 2020, Pages 1493–1566, https://doi.org/10.1093/qje/qjaa008
Close
Search
Close
Search
Advanced Search
Search Menu
Abstract
We provide a continuous-time “risk-centric” representation of the New Keynesian model, which we use to analyze the interactions between asset prices, financial speculation, and macroeconomic outcomes when output is determined by aggregate demand. In principle, interest rate policy is highly effective in dealing with shocks to asset valuations. However, in practice monetary policy faces a wide range of constraints. If these constraints are severe, a decline in risky asset valuations generates a demand recession. This reduces earnings and generates a negative feedback loop between asset prices and aggregate demand. In the recession phase, average beliefs matter because they not only affect asset valuations but also determine the strength of the amplification mechanism. In the ex ante boom phase, belief disagreements (or heterogeneous asset valuations) matter because they induce investors to speculate. This speculation exacerbates the crash by reducing high-valuation investors’ wealth when the economy transitions to recession, which depresses (wealth-weighted) average beliefs. Macroprudential policy that restricts speculation in the boom can Pareto improve welfare by increasing asset prices and aggregate demand in the recession.
© The Author(s) 2020. Published by Oxford University Press on behalf of President and Fellows of Harvard College.
This article is published and distributed under the terms of the Oxford University Press, Standard Journals Publication Model (https://academic.oup.com/journals/pages/open_access/funder_policies/chorus/standard_publication_model)
JEL
E00 - General E12 - Keynes; Keynesian; Post-Keynesian E21 - Consumption; Saving; Wealth E22 - Investment; Capital; Intangible Capital; Capacity E30 - General E40 - General G00 - General G01 - Financial Crises G11 - Portfolio Choice; Investment Decisions
Issue Section:
Article
You do not currently have access to this article.
Download all slides
Sign in
Get help with access
Personal account
- Sign in with email/username & password
- Get email alerts
- Save searches
- Purchase content
- Activate your purchase/trial code
Sign in Register
Institutional access
- Sign in through your institution
- Sign in with a library card Sign in with username/password Recommend to your librarian
Institutional account management
Sign in as administrator
Get help with access
Institutional access
Access to content on Oxford Academic is often provided through institutional subscriptions and purchases. If you are a member of an institution with an active account, you may be able to access content in one of the following ways:
IP based access
Typically, access is provided across an institutional network to a range of IP addresses. This authentication occurs automatically, and it is not possible to sign out of an IP authenticated account.
Sign in through your institution
Choose this option to get remote access when outside your institution. Shibboleth/Open Athens technology is used to provide single sign-on between your institution’s website and Oxford Academic.
- Click Sign in through your institution.
- Select your institution from the list provided, which will take you to your institution's website to sign in.
- When on the institution site, please use the credentials provided by your institution. Do not use an Oxford Academic personal account.
- Following successful sign in, you will be returned to Oxford Academic.
If your institution is not listed or you cannot sign in to your institution’s website, please contact your librarian or administrator.
Sign in with a library card
Enter your library card number to sign in. If you cannot sign in, please contact your librarian.
Society Members
Society member access to a journal is achieved in one of the following ways:
Sign in through society site
Many societies offer single sign-on between the society website and Oxford Academic. If you see ‘Sign in through society site’ in the sign in pane within a journal:
- Click Sign in through society site.
- When on the society site, please use the credentials provided by that society. Do not use an Oxford Academic personal account.
- Following successful sign in, you will be returned to Oxford Academic.
If you do not have a society account or have forgotten your username or password, please contact your society.
Sign in using a personal account
Some societies use Oxford Academic personal accounts to provide access to their members. See below.
Personal account
A personal account can be used to get email alerts, save searches, purchase content, and activate subscriptions.
Some societies use Oxford Academic personal accounts to provide access to their members.
Viewing your signed in accounts
Click the account icon in the top right to:
- View your signed in personal account and access account management features.
- View the institutional accounts that are providing access.
Signed in but can't access content
Oxford Academic is home to a wide variety of products. The institutional subscription may not cover the content that you are trying to access. If you believe you should have access to that content, please contact your librarian.
Institutional account management
For librarians and administrators, your personal account also provides access to institutional account management. Here you will find options to view and activate subscriptions, manage institutional settings and access options, access usage statistics, and more.
Purchase
Subscription prices and ordering for this journal
Purchasing options for books and journals across Oxford Academic
Short-term Access
To purchase short-term access, please sign in to your personal account above.
Don't already have a personal account? Register
A Risk-Centric Model of Demand Recessions and Speculation* - 24 Hours access
EUR €38.00
GBP £33.00
USD $41.00
Rental
This article is also available for rental through DeepDyve.
Advertisem*nt
Citations
Views
7,139
Altmetric
More metrics information
Metrics
Total Views 7,139
4,876 Pageviews
2,263 PDF Downloads
Since 3/1/2020
| Month: | Total Views: |
|---|---|
| March 2020 | 47 |
| April 2020 | 45 |
| May 2020 | 66 |
| June 2020 | 175 |
| July 2020 | 633 |
| August 2020 | 636 |
| September 2020 | 419 |
| October 2020 | 206 |
| November 2020 | 164 |
| December 2020 | 196 |
| January 2021 | 144 |
| February 2021 | 167 |
| March 2021 | 135 |
| April 2021 | 182 |
| May 2021 | 107 |
| June 2021 | 82 |
| July 2021 | 106 |
| August 2021 | 88 |
| September 2021 | 114 |
| October 2021 | 107 |
| November 2021 | 145 |
| December 2021 | 102 |
| January 2022 | 108 |
| February 2022 | 81 |
| March 2022 | 113 |
| April 2022 | 119 |
| May 2022 | 185 |
| June 2022 | 100 |
| July 2022 | 68 |
| August 2022 | 73 |
| September 2022 | 107 |
| October 2022 | 145 |
| November 2022 | 138 |
| December 2022 | 102 |
| January 2023 | 149 |
| February 2023 | 103 |
| March 2023 | 93 |
| April 2023 | 99 |
| May 2023 | 99 |
| June 2023 | 101 |
| July 2023 | 93 |
| August 2023 | 83 |
| September 2023 | 87 |
| October 2023 | 130 |
| November 2023 | 139 |
| December 2023 | 86 |
| January 2024 | 77 |
| February 2024 | 75 |
| March 2024 | 156 |
| April 2024 | 134 |
| May 2024 | 30 |
Altmetrics
Email alerts
Article activity alert
Advance article alerts
New issue alert
JEL classification alert
Receive exclusive offers and updates from Oxford Academic
Citing articles via
Google Scholar
-
Latest
-
Most Read
-
Most Cited
More from Oxford Academic
Economics
Social Sciences
Books
Journals
Advertisem*nt
