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Countercyclical Markups and News-Driven Business Cycles

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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 fluctuations. The addition of countercyclical markups and modest investment adjustment costs offers an easy fix to this conundrum. The simulated model generates quantitatively realistic business cycles with news shocks accounting for over half of the variance of technology shocks.

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File URL: http://www.economics.adelaide.edu.au/research/papers/doc/wp2012-02.pdf
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Bibliographic Info

Paper provided by University of Adelaide, School of Economics in its series School of Economics Working Papers with number 2012-02.

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Length: 27 pages
Date of creation: Jan 2012
Date of revision:
Handle: RePEc:adl:wpaper:2012-02

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Postal: Adelaide SA 5005
Phone: (618) 8303 5540
Web page: http://www.economics.adelaide.edu.au/
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Keywords: expectations-driven business cycles; markups;

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References

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Cited by:
  1. Beaudry, Paul & Portier, Franck, 2013. "News Driven Business Cycles: Insights and Challenges," CEPR Discussion Papers 9624, C.E.P.R. Discussion Papers.
  2. 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.

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