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Countercyclical Markups and News-Driven Business Cycles

  • Oscar Pavlov

    (University of Adelaide)

  • Mark Weder

    (University of Adelaide)

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 replicates the regular features of U.S. aggregate fluctuations. (Copyright: Elsevier)

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File URL: http://dx.doi.org/10.1016/j.red.2013.02.004
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Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.

Volume (Year): 16 (2013)
Issue (Month): 2 (April)
Pages: 371-382

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Handle: RePEc:red:issued:11-302
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