Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/301938 
Year of Publication: 
2024
Series/Report no.: 
Document de travail No. 2024-03
Publisher: 
Université du Québec à Montréal, École des sciences de la gestion (ESG UQAM), Département des sciences économiques, Montréal
Abstract: 
This paper studies the impact of Higher Order Belief (HOB) shocks, representing shifts in agents' beliefs about others' beliefs, on macroeconomic outcomes. The dynamic causal effects of these shocks are identified by leveraging a combination of a proxy-VAR approach and DSGE-based instruments. Our findings suggest that HOB shocks are indeed a key driver of the business cycle and account for a sizeable share of the observed business cycle volatility. Finally, our identification approach ensures that these shocks are not confounded with other structural/fundamental shocks.
Subjects: 
Higher Order Beliefs
Business cycles
proxy-VAR
DSGE
JEL: 
C32
E32
Document Type: 
Working Paper

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