Persistent Overoptimism Three Ways: Truckers, Fed Economists, Manufacturers
MishTalk
NOVEMBER 20, 2015
Explaining the Persistent Overoptimism In a cross-country study of private-sector forecasts from 1989 to 1998, Loungani (2001) finds that “the record of failure to predict recessions is virtually unblemished.” When the bubble bursts, the resulting debt overhang forces borrowers to repair their balance sheets via reduced spending or default.
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