1,720,970 research outputs found
Who is Googling Trump’s tariffs—And why that matters
No full textThis study investigates U.S. public concern over tariffs during the initial three months of Donald Trump's second term. By analyzing state-level Google search frequency for the topic ‘tariff’, it explores whether tariff-related anxiety was uniformly distributed across states or influenced by political affiliation. The data reveal widespread political polarization: states that supported Kamala Harris exhibited significantly higher search intensity compared to states that supported Trump. These findings suggest that voters in Harris-leaning states were more alarmed by the potential economic consequences of Trump's trade policies, highlighting both the politicization of trade policy and its varying resonance across the political spectrum
A tale of inattentiveness and the loss function: A model for household-level macroeconomic expectations
No full textThis paper presents a novel theoretical framework that integrates information stickiness with asymmetric costs of overpredicting and underpredicting macroeconomic variables. We focus on non-professional agents who exhibit these traits. The asymmetric loss function leads to the presence of a non-null bias in expectations, and information stickiness generates a positive relationship between this bias and the stickiness of expectations. At the empirical level, this relationship translates into a negative correlation, at the level of socio-demographic groups, between the mean and the standard deviation of the time series of the expectations. Three decades of data on consumers’ unemployment expectations in the US and the EU support our results, validating the hypothesized negative relationship between the mean and standard deviation of aggregate expectations. The framework is also consistent with established patterns of consumer expectations
Fleeting extinction? Unraveling the persistence of noise traders in financial markets with learning and replacement
No full textWe describe an agent-based model of a financial market where agents can learn whether to buy costly information on returns, to use noise as if it were information, or to disregard any signals. We show that while learning alone drives all noise traders to extinction in stationary populations, allowing for small rates of replacement of existing agents with new ones suffices to generate substantial levels of persistent noise trading, with the equilibrium share of agents using irrelevant news reaching double digits. Remarkably, the presence of noise traders, when replacement is realistically considered, inflates the share of agents who use costly information relative to the benchmark scenario without replacement
A replication of Pindyck’s willingness to pay: on the efforts required to obtain results
No full textWe replicate and use more recent data to re-estimate the paper “Uncertain outcomes and climate change policy”, Pindyck, J. Environ. Econ. Manag., 2012. In several cases, verification analysis confirms the results and the associated economic interpretation. However, those results cannot be replicated in one out of five cases. The replication is, therefore, only partially successful: the numerical results for some sets of parameter values turn out to be overly sensitive to a variety of technical computational settings. This suggests that great caution is needed with regard to estimates and policy conclusions based on this model. A re-estimation of the model using more recent climate data, which suggests that temperature increase is now higher on average but less widely dispersed, does not lead to significant economic differences in the results
Three essays on computational methods for policy making
No full textChapters One and Two develop a common-source infection model to explain the formation of households expectations. The model is based on the work presented in "Macroeconomic Expectations of Households and Professional Forecasters" (Carroll, QJE, 2003). The extended framework is applied to study unemployment expectations for a selected group of European countries. Results show that: i) according to econometric analyses and agent-based simulations, the novel framework is supported by survey data; ii) the probability of absorbing new information is (negatively) correlated with the level of uncertainty spread by media and the Internet; iii) households expectations have a non trivial role in determining the output gap. Furthermore, there are economically significant differences in expectations across different demographic groups and these differences may be explained through heterogeneous parameters of the agent-based model. In particular, education seems to be a driver of macroeconomic expectations, with the less educated being less up-to-date.
In the third chapter, I present a replication and a robustness analysis of ``Uncertain outcomes and climate change policy'' (R. Pindyck, JEEM, 2012). The paper is concerned with the estimation of the willingness-to-pay of society to avoid climate change. The replication part reproduces the original results in many cases and confirms the quality and interpretation of the work. The robustness analysis, on the one hand, re-estimates the model with more recent data on climate change: the willingness to pay does not vary much with respect to the original paper; on the other hand, changes the functional form producing much bigger and potentially problematic increments of the willingness to pay
The Equity Premium Puzzle: An Application of an Agent-Based Evolutionary Model
No full textWe describe an agent-based model of a financial market with a stock and a bond. Agents compete in repeated rounds, decide whether to acquire costly information and can pick one of 16 strategies to allocate their investments, under evolutionary pressure driven by the comparison of the realized short-term revenues from trading. We show that, while informed traders survive in some cases, the equilibrium shares are strongly biased in favor of strategies that make little use of information and systematically overestimate the riskiness of the stock. As a consequence, the majority of the population ends up in buying fewer stocks than would be otherwise expected or deemed rational.
This evolutionary dynamics offers a novel way to explain the equity premium puzzle first described by Mehra and Prescott (The equity premium: A puzzle. Journal of Monetary Economics 1985), according to which it's hard to find reasons for the widespread lack of investment in risky assets. Evolution based on a straightforward comparison of revenues is a simple and cognitively appealing avenue to reach a population of traders using (over-)cautious strategies to curb the risk of long-term ``financial extinction''. Simulations run in NetLogo also demonstrate that very little information may be used in noisy markets or when the cost of information is substantial
A replication of Pindyck’s willingness to pay: on the sacrifice needed to obtain results
Full text linkWe present a verification, an extension and a reanalysis of “Uncertain outcomes and climate
change policy”, R. Pindyck, Journal of Environmental Economics and Management, 2012. As far as
verification is concerned, we are able to reproduce the results provided in Pindyck’s work in
many cases and convincingly confirm the quality of the work. Some discrepancies are present,
they are due to rounding or related to specific sets of parametric values and do not change the
economic interpretation or significance of the results. The re-estimation of the model with
more recent data on climate change made available in 2014 shows that temperature increments
are now deemed to be higher in mean but less dispersed. As a consequence, the willingness to
pay doesn’t vary much with respect to the original paper. We also modify the functional form
describing the impact of temperature increase on the growth rate of consumption and obtain
much bigger and potentially problematic increments of the willingness to pay. Finally, the
paper demonstrates that the numerical results are sensitive to a variety of technical settings
used in the computations and suggests that great care is needed in obtaining estimates and
employing results in policy discussions
Expectations and Uncertainty: A Common-Source Infection Model for Selected European Countries
Full text linkWe present a common-source infection model for explaining the formation of expectations by households. Starting from the framework of "Macroeconomic expectations of household and professional forecasters" (C.D. Carroll, The Quarterly Journal of
Economics, 2003), we augment the original model assuming that also uninformed individuals are able to update expectations according to a naive econometric process. In this novel framework, a key role is played by the parameter measuring the prob-
ability of being informed: the dynamics of this factor over time capture the level of uncertainty perceived by households. This new framework is applied to study unemployment expectations for a selected group of European countries (France, Germany,
Italy and the UK). Our results show that: (i) the novel framework is supported by data on unemployment expectations; and (ii) the probability of being informed is (negatively) correlated with the level of uncertainty spread by newspapers and conveyed by Internet
Unemployment expectations in an agent-based model with education
Full text linkWhy are unemployment expectations of the “man in the street” markedly different from professional forecasts? We present an agent-based model to explain this deep disconnection using boundedly rational agents with different levels of education. A good fit of empirical data is obtained under the assumptions that there is staggered update of information, agents update episodically their estimate and there is a fraction of households who always and stubbornly forecast that the unemployment is going to raise. The model also sheds light on the role of education and suggests that more educated agents update their information more often and less obstinately fixate on the worst possible forecast
Global risks, the macroeconomy, and asset prices
Full text linkWe propose a novel index of global risks awareness (GRAI) based on the most concerning risks—classified in five categories (economic, environmental, geopolitical, societal, and technological)—reported by the World Economic Forum (WEF) according to the potential impact and likelihood occurrence. The degree of public concern toward these risks is captured by Google search volumes on topics having the same or similar wording of that one of the WEF Global Risk Report. The dynamics of our GRAI exhibits several spillover episodes and indicates that concerns on the five different categories of global risks are—on average—highly interconnected. We further examine the interconnection between global risks perceptions and the macroeconomy and find that concerns on economic-, geopolitical-, and societal-related risks are net shock transmitters, whereas the macroeconomic variables are largely net receivers. Finally, we perform standard cross-sectional asset pricing tests and provide evidence that rising interconnection among global risks awareness commands a positive and statistically significant risk premium
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