【Macro Seminar】Macroprudential Policy Under Diagnostic Expectations
2025/10/27
研討會日期 : 2025-10-27
時間 : 14:30
主講人 : Professor Jun Hee Kwak
地點 : Conference Room B110
主持人 : Professor Chun-Che Chi
演講者簡介 : Professor Jun Hee Kwak received his Ph.D. in Economics from the University of Maryland at College Park in 2021. He is currently an Assistant Professor at Sogang University. His research interests are International Finance, Macroeconomics, and Macro-Finance.
演講摘要 : In this paper, we incorporate diagnostic expectations into the standard small open economy model with an occasionally binding constraint. Diagnostic expectations are a forward-looking model of belief formation characterized by an overreaction to recent news. We find that diagnostic expectations exacerbate crisis dynamics and generate realistic boom-bust credit cycles through the interaction of overreaction to news, neglect of risk, and the borrowing constraint. Optimal macroprudential policy mainly addresses the pecuniary externality and corresponding overborrowing in normal times, while mitigating underborrowing induced by over-pessimism during financial crises. Policymakers often advocate for a macroprudential policy of "leaning against the wind,'' while the standard quantitative model typically recommends "fueling the economic boom." Our model bridges this gap, aligning the quantitative framework with the conventional wisdom of policymakers.
