A rational expectations equilibrium model of urban growth and land markets

1991 ◽  
Vol 4 (2) ◽  
Author(s):  
Masahisa Fujita
Keyword(s):  
Urban Growth ◽  
Equilibrium Model ◽  
Rational Expectations ◽  
Land Markets ◽  
Rational Expectations Equilibrium

Funding Constraints and Informational Efficiency

2020 ◽  
Author(s):  
Sergei Glebkin ◽  
Naveen Gondhi ◽  
John Chi-Fong Kuong
Keyword(s):  
Risk Premium ◽  
Equilibrium Model ◽  
Information Acquisition ◽  
Rational Expectations ◽  
Return Volatility ◽  
Informational Efficiency ◽  
Rational Expectations Equilibrium ◽  
Price Informativeness ◽  
Amplification Mechanism ◽  
Increases In Risk

Abstract We analyze a tractable rational expectations equilibrium model with margin constraints. We argue that constraints affect and are affected by informational efficiency, leading to a novel amplification mechanism. A decline in wealth tightens constraints and reduces investors’ incentive to acquire information, lowering price informativeness. Lower informativeness, in turn, increases the risk borne by financiers who fund trades, leading them to further tighten constraints faced by investors. This information spiral leads to (a) significant increases in risk premium and return volatility in crises, when investors wealth declines, (b) complementarities in information acquisition in crises, and (c) complementarities in margin requirements.

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