ERC FUNDED PROJECTS

Advanced capitalist economies experience large and persistent movements in asset prices that are difficult to justify with economic fundamentals. The internet bubble of the 1990s and the real state market bubble of the 2000s are two recent examples. The predominant view is that these bubbles are a market failure, and are caused by some form of individual irrationality on the part of market participants. This project is based instead on the view that market participants are individually rational, although this does not preclude sometimes collectively sub-optimal outcomes. Bubbles are thus not a source of market failure by themselves but instead arise as a result of a pre-existing market failure, namely, the existence of pockets of dynamically inefficient investments. Under some conditions, bubbles partly solve this problem, increasing market efficiency and welfare. It is also possible however that bubbles do not solve the underlying problem and, in addition, create negative side-effects. The main objective of this project is to develop this view of asset bubbles, and produce an empirically-relevant macroeconomic framework that allows us to address the following questions: (i) What is the relationship between bubbles and financial market frictions? Special emphasis is given to how the globalization of financial markets and the development of new financial products affect the size and effects of bubbles. (ii) What is the relationship between bubbles, economic growth and unemployment? The theory suggests the presence of virtuous and vicious cycles, as economic growth creates the conditions for bubbles to pop up, while bubbles create incentives for economic growth to happen. (iii) What is the optimal policy to manage bubbles? We need to develop the tools that allow policy makers to sustain those bubbles that have positive effects and burst those that have negative effects.

1 000 000 €

Start date: 2010-04-01, End date: 2015-03-31

"A conventional assumption in dynamic models is that agents form their expectations in a very sophisticated manner. In particular, that they have Rational Expectations (RE). We develop some tools to relax this assumption while retaining fully optimal behaviour by agents. We study implications for asset pricing and macro policy. We assume that agents have a consistent set of beliefs that is close, but not equal, to RE. Agents are ""Internally Rational"", that is, they behave rationally given their system of beliefs. Thus, it is conceptually a small deviation from RE. It provides microfoundations for models of adaptive learning, since the learning algorithm is determined by agents’ optimal behaviour. In previous work we have shown that this framework can match stock price and housing price fluctuations, and that policy implications are quite different. In this project we intend to: i) develop further the foundations of internally rational (IR) learning, ii) apply this to explain observed asset price price behavior, such as stock prices, bond prices, inflation, commodity derivatives, and exchange rates, iii) extend the IR framework to the case when agents entertain various models, iv) optimal policy under IR learning and under private information when some hidden shocks are not revealed ex-post. Along the way we will address policy issues such as: effects of creating derivative markets, sovereign spread as a signal of sovereign default risk, tests of fiscal sustainability, fiscal policy when agents learn, monetary policy (more specifically, QE measures and interest rate policy), and the role of credibility in macro policy."

1 970 260 €

Start date: 2013-06-01, End date: 2018-08-31

The ARTSOUNDSCAPES project deals with sound, rock art and sacred landscapes among past hunter-gatherers and early agricultural societies around the world. The potential of sound to stimulate powerful emotions makes it a common medium for conferring places with extraordinary agency. Ethnographic and ethnohistorical sources indicate that these sites are often endowed with a sacred significance and, in many cases, they also receive special treatment, including the production of rock paintings. Despite the aural experience being an integral component of the human condition and a key element in ritual, archaeology has largely been unable to study it systematically. Rock art landscapes are no exception and, although some studies have been made, they have largely been reproached for their lack of scientific rigour and subjectivity. ARTSOUNDSCAPES will fully address this weakness by investigating the perception of sound in rock art landscapes from an interdisciplinary approach. Borrowing methods developed in acoustic engineering, the project will assess, from an objective and quantitative perspective, the acoustic properties of rock art landscapes in selected areas around the world: the Western/Central Mediterranean in Europe, Siberia in Asia, and Baja California in North America. Human experiences associated with altered or mystical states invoked by the identified special sonic characteristics of these landscapes will be further tested by exploring the psychoacoustic effects these soundscapes have on people and their neural correlate to brain activity. The project will also thoroughly survey ethnographic attitudes to sacred soundscapes based on both current premodern societies and ethnohistorical sources. The groundbreaking combination of this array of interdisciplinary approaches will facilitate the ultimate aim of the project: to propose a phenomenological understanding of sacred soundscapes among late hunter-gatherers and early agriculturalists around the world.

2 239 375 €

Start date: 2018-10-01, End date: 2024-09-30

Atmospheric aerosol particles and trace gases affect the quality of our life in many ways (e.g. health effects, changes in climate and hydrological cycle). Trace gases and atmospheric aerosols are tightly connected via physical, chemical, meteorological and biological processes occurring in the atmosphere and at the atmosphere-biosphere interface. One important phenomenon is atmospheric aerosol formation, which involves the production of nanometer-size particles by nucleation and their growth to detectable sizes. The main scientific objectives of this project are 1) to quantify the mechanisms responsible for atmospheric new particle formation and 2) to find out how important this process is for the behaviour of the global aerosol system and, ultimately, for the whole climate system. Our scientific plan is designed as a research chain that aims to advance our understanding of climate and air quality through a series of connected activities. We start from molecular simulations and laboratory measurements to understand nucleation and aerosol thermodynamic processes. We measure nanoparticles and atmospheric clusters at 15-20 sites all around the world using state of the art instrumentation and study feedbacks and interactions between climate and biosphere. With these atmospheric boundary layer studies we form a link to regional-scale processes and further to global-scale phenomena. In order to be able to simulate global climate and air quality, the most recent progress on this chain of processes must be compiled, integrated and implemented in Climate Change and Air Quality numerical models via novel parameterizations.

2 000 000 €

Start date: 2009-01-01, End date: 2013-12-31