Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/153840 
Year of Publication: 
2011
Series/Report no.: 
ECB Working Paper No. 1407
Publisher: 
European Central Bank (ECB), Frankfurt a. M.
Abstract: 
In this paper we discuss the role of the cross-sectional heterogeneity of beliefs in the context of understanding and assessing macroeconomic vulnerability. Emphasis lies on the potential of changing levels of disagreement in expectations to influence the propensity of the economy to switch between different regimes, a hypothesis that finds robust empirical support from a regime-switching model with endogenous transition probabilities for output growth and realized stock market volatility in the US.
Subjects: 
business cycles
endogenous transition probabilities
forecasting
Heterogeneous beliefs
regime-switching
JEL: 
C53
D8
E32
Document Type: 
Working Paper

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