00000nam 2200000zi 4500 9.903141 CaOODSP 20230928105248 m o d f cr mn||||||||| 210908t20212021onca ob f000 0 eng d CaOODSP eng rda CaOODSP FB3-5/2021-33E-PDF Acharya, Sushant, author. The anatomy of sentiment-driven fluctuations / by Sushant Acharya, Jess Benhabib and Zhen Huo. Ottawa, Ontario, Canada : Bank of Canada = Banque du Canada, 2021. ©2021 1 online resource (iii, 43 pages) : colour illustrations. text txt rdacontent computer c rdamedia online resource cr rdacarrier Staff working paper = Document de travail du personnel, 1701-9397 ; 2021-33 "Last updated: July 14, 2021." Includes bibliographical references (pages 30-33). "We show that sentiments—self-fulfilling changes in beliefs that are orthogonal to fundamentals—can drive persistent aggregate fluctuations under rational expectations in a beauty contest game. Such fluctuations can occur even in the absence of exogenous aggregate fundamental shocks. Moreover, sentiments alter the volatility and persistence of aggregate outcomes in response to fundamental shocks. We provide (i) necessary conditions under which sentiments can affect aggregate outcomes in equilibrium and (ii) conditions under which sentiments drive persistent fluctuations and when they only affect aggregate outcomes contemporaneously. We also show that sentiment equilibria are stable under least-squares learning while the fundamental equilibrium is not"--Abstract, page iii. Business cycles Econometric models. Cycles économiques Modèles économétriques. Bank of Canada, issuing body. Staff working paper (Bank of Canada) 2021-33. (CaOODSP)9.806221 PDF 1.78 MB https://publications.gc.ca/collections/collection_2021/banque-bank-canada/FB3-5-2021-33-eng.pdf