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On expectations‐driven business cycles in economies with production externalities

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  • Stefano Eusepi*

Abstract

Expectations‐driven business cycles are defined as positive co‐movement between consumption, investment and hours that result from a change in expectations, holding constant technology, preferences and government intervention. This note explores the possibility of expectations‐driven business cycles in business cycle models with external effects. It is found that in one‐sector models conditions for expectations‐driven business cycles and conditions for multiple equilibria are tightly connected. In two‐sector models those conditions appear to be mutually exclusive.

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  • Stefano Eusepi*, 2009. "On expectations‐driven business cycles in economies with production externalities," International Journal of Economic Theory, The International Society for Economic Theory, vol. 5(1), pages 9-23, March.
    • Handle: RePEc:bla:ijethy:v:5:y:2009:i:1:p:9-23
    DOI: 10.1111/j.1742-7363.2008.00101.x
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    Cited by:

    1. Hammad Qureshi, 2009. "News Shocks and Learning-by-doing," Working Papers 09-06, Ohio State University, Department of Economics.
    2. Jang-Ting Guo & Anca-Ioana Sirbu & Richard M.H. Suen, 2012. "On expectations-driven business cycles in economies with production externalities: A comment," International Journal of Economic Theory, The International Society for Economic Theory, vol. 8(3), pages 313-319, September.
    3. Paul Beaudry & Franck Portier, 2014. "News-Driven Business Cycles: Insights and Challenges," Journal of Economic Literature, American Economic Association, vol. 52(4), pages 993-1074, December.
    4. Oscar Pavlov & Mark Weder, 2013. "Countercyclical Markups and News-Driven Business Cycles," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(2), pages 371-382, April.
    5. Pavlov, Oscar, 2016. "Can firm entry explain news-driven fluctuations?," Economic Modelling, Elsevier, vol. 52(PB), pages 427-434.
    6. Guo, Jang-Ting & Sirbu, Anca-Ioana & Weder, Mark, 2015. "News about aggregate demand and the business cycle," Journal of Monetary Economics, Elsevier, vol. 72(C), pages 83-96.
    7. Kazuo Mino, 2017. "Sunspot-Driven Business Cycles: An Overview," KIER Working Papers 973, Kyoto University, Institute of Economic Research.
    8. Kazuo Nishimura & Myrna Wooders & Makoto Yano, 2013. "Macroeconomic dynamics and its micro foundation: A special issue in honor of Cuong Le Van," International Journal of Economic Theory, The International Society for Economic Theory, vol. 9(1), pages 1-3, March.

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