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Recent Developments in Business Cycle Theory: News, Expectations and Demand Shocks

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  • Guido Lorenzoni

    ()
    (MIT and NBER, Cambridge (MA))

Abstract

This paper surveys some recent work in the theory of business cycles, which emphasizes the role of public news and consumer expectations as driving forces behind short-run aggregate fluctuations. The paper uses a simple two period model to introduce and discuss three issues regarding this class of models: (1) what is the role of nominal rigidities, (2) what are the testable implications of these models, (3) what are their implications for monetary policy.

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File URL: http://www.rivistapoliticaeconomica.it/2006/pdf/Lorenzoni.pdf
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Bibliographic Info

Article provided by SIPI Spa in its journal Rivista di Politica Economica.

Volume (Year): 96 (2006)
Issue (Month): 2 (March-April)
Pages: 61-78

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Handle: RePEc:rpo:ripoec:v:96:y:2006:i:2:p:61-78

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  1. Lawrence Christiano & Cosmin Ilut & Roberto Motto & Massimo Rostagno, 2010. "Monetary policy and stock market booms," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 85-145.
  2. Beaudry, Paul & Portier, Franck, 2003. "Stock Prices, News and Economic Fluctuations," CEPR Discussion Papers 3844, C.E.P.R. Discussion Papers.
  3. Frank Smets & Raf Wouters, 2003. "An Estimated Dynamic Stochastic General Equilibrium Model of the Euro Area," Journal of the European Economic Association, MIT Press, vol. 1(5), pages 1123-1175, 09.
  4. Guido Lorenzoni, 2009. "A Theory of Demand Shocks," American Economic Review, American Economic Association, vol. 99(5), pages 2050-84, December.
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Cited by:
  1. Lilia Karnizova, 2012. "News Shocks, Productivity and the U.S. Investment Boom-Bust Cycle," Working Papers 1201E, University of Ottawa, Department of Economics.

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