Advanced Search
MyIDEAS: Login to save this paper or follow this series

Countercyclical Markups and News-Driven Business Cycles

Contents:

Author Info

  • Oscar Pavlov

    (School of Economics, University of Adelaide)

  • Mark Weder

    ()
    (School of Economics, University of Adelaide)

Abstract

The standard one-sector real business cycle model is unable to generate expectations-driven business cycles. The current paper shows that this conundrum can be solved by adding countercyclical markups and modest capital adjustment costs.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.economics.adelaide.edu.au/research/papers/doc/wp2011-28.pdf
Download Restriction: no

Bibliographic Info

Paper provided by University of Adelaide, School of Economics in its series School of Economics Working Papers with number 2011-28.

as in new window
Length: 16 pages
Date of creation: Jul 2011
Date of revision:
Handle: RePEc:adl:wpaper:2011-28

Contact details of provider:
Postal: Adelaide SA 5005
Phone: (618) 8303 5540
Web page: http://www.economics.adelaide.edu.au/
More information through EDIRC

Related research

Keywords: expectations-driven business cycles; markups;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Barro, Robert J & King, Robert G, 1984. "Time-separable Preferences and Intertemporal-Substitution Models of Business Cycles," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 99(4), pages 817-39, November.
  2. Pengfei Wang, 2012. "Understanding Expectation‐Driven Fluctuations: A Labor‐Market Approach," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 44, pages 487-506, 03.
  3. Gali Jordi, 1994. "Monopolistic Competition, Business Cycles, and the Composition of Aggregate Demand," Journal of Economic Theory, Elsevier, Elsevier, vol. 63(1), pages 73-96, June.
  4. Nir Jaimovich & Sergio Rebelo, 2006. "Can News About the Future Drive the Business Cycle?," 2006 Meeting Papers, Society for Economic Dynamics 31, Society for Economic Dynamics.
  5. Lawrence J. Christiano & Martin Eichenbaum & Charles Evans, 2001. "Nominal Rigidities and the Dynamic Effects of a Shock to Monetary Policy," NBER Working Papers 8403, National Bureau of Economic Research, Inc.
  6. Benhabib Jess & Farmer Roger E. A., 1994. "Indeterminacy and Increasing Returns," Journal of Economic Theory, Elsevier, Elsevier, vol. 63(1), pages 19-41, June.
  7. Guo, Jang-Ting & Sirbu, Anca-Ioana & Suen, Richard M. H., 2010. "On Expectations-Driven Business Cycles in Economies with Production Externalities: A Comment," MPRA Paper 24989, University Library of Munich, Germany.
  8. Hornstein, Andreas, 1993. "Monopolistic competition, increasing returns to scale, and the importance of productivity shocks," Journal of Monetary Economics, Elsevier, Elsevier, vol. 31(3), pages 299-316, June.
  9. Beaudry, Paul & Portier, Franck, 2001. "An Exploration into Pigou's Theory of Cycles," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2996, C.E.P.R. Discussion Papers.
  10. Stefano Eusepi & Bruce Preston, 2009. "Labor Supply Heterogeneity and Macroeconomic Co-movement," NBER Working Papers 15561, National Bureau of Economic Research, Inc.
  11. Paul Beaudry & Franck Portier, 2004. "Stock Prices, News and Economic Fluctuations," NBER Chapters, in: Enhancing Productivity (NBER-CEPR-TCER-Keio conference) National Bureau of Economic Research, Inc.
  12. Guido W. Imbens & Donald B. Rubin & Bruce I. Sacerdote, 2001. "Estimating the Effect of Unearned Income on Labor Earnings, Savings, and Consumption: Evidence from a Survey of Lottery Players," American Economic Review, American Economic Association, American Economic Association, vol. 91(4), pages 778-794, September.
  13. Karnizova, Lilia, 2010. "The spirit of capitalism and expectation-driven business cycles," Journal of Monetary Economics, Elsevier, Elsevier, vol. 57(6), pages 739-752, September.
  14. Miles S. Kimball & Matthew D. Shapiro, 2008. "Labor Supply: Are the Income and Substitution Effects Both Large or Both Small?," NBER Working Papers 14208, National Bureau of Economic Research, Inc.
  15. Nir Jaimovich, 2004. "Firm Dynamics, Markup Variations, and the Business Cycle," Discussion Papers, Stanford Institute for Economic Policy Research 07-013, Stanford Institute for Economic Policy Research, revised Mar 2007.
  16. Beaudry, Paul & Portier, Franck, 2004. "When Can Changes in Expectations Cause Business Cycle Fluctuations in Neo-Classical Settings?," CEPR Discussion Papers, C.E.P.R. Discussion Papers 4628, C.E.P.R. Discussion Papers.
  17. Oscar Pavlov & Mark Weder, 2011. "Variety Matters," School of Economics Working Papers, University of Adelaide, School of Economics 2011-23, University of Adelaide, School of Economics.
  18. Susanto Basu & John G. Fernald, 1996. "Returns to scale in U.S. production: estimates and implications," International Finance Discussion Papers, Board of Governors of the Federal Reserve System (U.S.) 546, Board of Governors of the Federal Reserve System (U.S.).
  19. Cosmin L. Ilut & Lawrence J. Christiano & Roberto Motto & Massimo Rostagno, 2010. "Monetary Policy and Stock Market Booms," Working Papers, Duke University, Department of Economics 10-69, Duke University, Department of Economics.
  20. Julio J. Rotemberg & Michael Woodford, 1999. "The Cyclical Behavior of Prices and Costs," NBER Working Papers 6909, National Bureau of Economic Research, Inc.
  21. Stephanie Schmitt-Grohe, 1995. "Comparing four models of aggregate fluctuations due to self-fulfilling expectations," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 95-17, Board of Governors of the Federal Reserve System (U.S.).
  22. Stefano Eusepi*, 2009. "On expectations-driven business cycles in economies with production externalities," International Journal of Economic Theory, The International Society for Economic Theory, The International Society for Economic Theory, vol. 5(1), pages 9-23.
  23. Wen, Yi, 1998. "Capacity Utilization under Increasing Returns to Scale," Journal of Economic Theory, Elsevier, Elsevier, vol. 81(1), pages 7-36, July.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Jang-Ting Guo & Anca-Ioana Sirbu & Mark Weder, 2012. "News about Aggregate Demand and the Business Cycle," Working Papers 12-02, Department of Economics, West Virginia University.
  2. Paul Beaudry & Franck Portier, 2014. "News Driven Business Cycles: Insights and Challenges," 2014 Meeting Papers, Society for Economic Dynamics 289, Society for Economic Dynamics.
  3. Gunes Kamber & Konstantinos Theodoridis & Christoph Thoenissen, 2014. "News-driven business cycles in small open economies," CAMA Working Papers 2014-02, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:adl:wpaper:2011-28. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dmitriy Kvasov).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.