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This paper studies the effects of overreaction to recent news for macroeconomic outcomes in the context of a quantitative model of sovereign debt and default. Overreaction is formalized in terms of …
Discussion paper
After 2008, the Southern European economies suffered a strong and persistent increase in unemployment. Rising government bond spreads necessitated the implementation of austerity policies. Austerity, …
Discussion paper
Chasing and the house money effect are well-known phenomena in dynamic environments of risky activities such as investment decisions or gambling. Recent studies suggest that such behavior emerges …
Discussion paper