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Information Dynamics and Macro Fluctuations

  • Kyriakos Chousakos
  • Gary Gorton
  • Guillermo Ordoñez
American Economic Journal: Macroeconomics
vol. 15, no. 4, October 2023
(pp. 372-400)
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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.

Citation

Chousakos, Kyriakos, Gary Gorton, and Guillermo Ordoñez. 2023. "Information Dynamics and Macro Fluctuations." American Economic Journal: Macroeconomics, 15 (4): 372-400. DOI: 10.1257/mac.20210101

Additional Materials

JEL Classification

  • D24 Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
  • D83 Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
  • E32 Business Fluctuations; Cycles
  • E44 Financial Markets and the Macroeconomy
  • G01 Financial Crises
  • G32 Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
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