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Information Dynamics and Macro Fluctuations

Author

Listed:
  • Kyriakos Chousakos
  • Gary Gorton
  • Guillermo Ordoñez

Abstract

The amount of information produced about firms' productivities and about the quality of collateral backing their loans varies over time. These information dynamics determine the evolution of credit, output and productivity, which feeds back into incentives to produce information. We characterize this intricate dynamic relation. A credit boom happens when information about collateral depreciates. A financial crisis happens when information about collateral is suddenly generated. Information about firms' individual productivities over credit booms can prevent or tame the crisis, acting as an endogenous macroprudential force.

Suggested Citation

  • Kyriakos Chousakos & Gary Gorton & Guillermo Ordoñez, 2023. "Information Dynamics and Macro Fluctuations," American Economic Journal: Macroeconomics, American Economic Association, vol. 15(4), pages 372-400, October.
    • Handle: RePEc:aea:aejmac:v:15:y:2023:i:4:p:372-400
    DOI: 10.1257/mac.20210101
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    More about this item

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G01 - Financial Economics - - General - - - Financial Crises
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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