Recent Developments in Business Cycle Theory: News, Expectations and Demand Shocks
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.
Volume (Year): 96 (2006)
Issue (Month): 2 (March-April)
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