Forbearance impedes confidence recovery

Keiichiro Kobayashi

研究成果: Article査読

抄録

The finding that countries that take a slow approach to reform during a financial crisis run into problems of persistent stagnation is usually explained as follows: forbearance policy (i.e., an implicit subsidy to inefficient sectors) distorts resource allocation, causing a supply shortage of resources to the productive sectors. I propose another explanation: forbearance impedes the recovery of confidence that is lost during a financial crisis. If confidence is restored through Bayesian learning by economic agents based on observations of government actions, then the inaction of the government (forbearance) impedes Bayesian learning. The model shows that forbearance policy delays economic recovery.

本文言語English
ページ(範囲)178-188
ページ数11
ジャーナルJournal of Macroeconomics
29
1
DOI
出版ステータスPublished - 2007 3月

ASJC Scopus subject areas

  • 経済学、計量経済学

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