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Households’ assets, sentiment shocks and business cycles

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  • Miura, Shogo

Abstract

Households’ asset value is volatile compared to gross domestic product and sometimes features a typical pattern of boom and bust. Such a pattern is observed around the subprime loan bubble in the United States. Many studies have examined what factors play a role in the background. This paper presents a dynamic stochastic general equilibrium model, directly incorporating the households that obtain utility from their wealth and the “sentiment shocks,” which affect the economy through this formulation. By estimating the model using US data, we show that sentiment shocks account for a mild but non-negligible part of macroeconomic variables’ fluctuations.

Suggested Citation

  • Miura, Shogo, 2023. "Households’ assets, sentiment shocks and business cycles," Economic Modelling, Elsevier, vol. 118(C).
    • Handle: RePEc:eee:ecmode:v:118:y:2023:i:c:s0264999322003121
    DOI: 10.1016/j.econmod.2022.106075
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    Cited by:

    1. Fehrle, Daniel & Heiberger, Christopher, 2024. "The return on everything and the business cycle in production economies," Economic Modelling, Elsevier, vol. 136(C).

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    More about this item

    Keywords

    Sentiment shock; Households’ assets; DSGE model; Bayesian estimation;
    All these keywords.

    JEL classification:

    • 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
    • E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation: Models and Applications

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