|Year of selection||2009|
|Institution||Barcelona Graduate School of Economics|
Type of support
1 250 000 €
When great expectations meet financial uncertainty
In our times of economic crisis, stability and sustainable growth look like a faraway dream. States are heavily indebted and we are not so sure about how to predict how markets will unfold.
Asset prices and fiscal and debt policy are two phenomena currently studied by Professor Albert Marcet, newly appointed AXA Distinguished Professor in macroeconomic risks at Barcelona Graduate School of Economics (GSE). Formerly Professor at the London School of Economics, he specialises in Macroeconomics and Monetary Economics and has worked extensively with worldwide known scientists such as Economics Nobel Prize Thomas Sargent.
His current studies highlight the importance of coordination between fiscal and debt policies. It would seem reasonable to make sure that a debt level is sustainable before voting fiscal measures leading to it – but it’s not the way it works today.
Professor Marcet has also been an explorer of the importance of beliefs of agents when determining asset prices: the expected payoff generated is obviously relevant, but due to the difficulties in predicting the future with enough precision, expectations of investors about sale prices in the next period matter as much. Such expectations can lead to financial bubbles, even in perfectly rational markets.
Professor Marcet’s analysis are rooted in his study of how agents learn about expectation formation. He explains that agents may be “internally rational”; however, they might not have all information about market outcomes and fundamentals when taking financial decisions. Since getting the relevant knowledge is long and expensive, agents finally reduce the horizon of their choices to a short term period to mitigate uncertainty.
His findings are relevant to policy makers, helping them to consider when it becomes necessary to burst a speculative bubble to preserve the future of a market.
At GSE Barcelona, Professor Marcet benefits from an international high level environment. ”The Barcelona Graduate School of Economics has emerged as a leading center for economics research in Europe. The students and professors who study and research there are of the highest caliber", says Professor Reinghard Selten, Nobel Laureate in Economics and Member of its Barcelona GSE’s Scientific Council.
Founded in 2006 and legally recognised as a Foundation dedicated to higher education, The Barcelona Graduate School of Economics derives from a long history of unique public-private partnership, bringing together the Universitat Pompeu Fabra, the Universitat Autònoma de Barcelona, the Institute for Economic Analysis the Spanish Research Council and the Centre for Research in International Economics.
Albert Marcet’s AXA Distinguished Professorship studies “macroeconomic risks”, i.e. uncertainties of any origin that affect the aggregate behaviour of an economy. It is part of Barcelona GSE’s policy in attracting and retaining promising international talents.
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