‘Belief-twisting' macro shocks can reverberate through generations, research finds


‘Belief-twisting' events such as an economic depression can influence households' behaviours for generations, as the "observation of macroeconomic data corrects the twisted beliefs very slowly", a new paper has found.

Belief shocks and the macroeconomy, by Jacek Suda at the Banque de France, studies the role of shocks to beliefs combined with Bayesian learning in a standard equilibrium business cycle framework.

Suda examines how beliefs arising from the Great Depression may have influenced the

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