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News about Aggregate Demand and the Business Cycle

Listed author(s):
  • Jang-Ting Guo

    (Department of Economics, University of California-Riverside)

  • Anca-Ioana Sirbu

    (Department of Economics, University of California-Riverside)

  • Mark Weder

    ()

    (School of Economics, University of Adelaide)

We show that a one-sector real business cycle model with variable capital utilization and mild increasing returns-to-scale is able to generate qualitatively as well as quantitatively realistic aggregate fluctuations driven by news shocks to future consumption demand. In sharp contrast to many studies in the existing expectations-driven business cycle literature, our results do not rely on non-separable preferences or investment adjustment costs.

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File URL: http://www.economics.adelaide.edu.au/research/papers/doc/wp2012-01.pdf
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Paper provided by University of Adelaide, School of Economics in its series School of Economics Working Papers with number 2012-01.

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Length: 16 pages
Date of creation: Jan 2012
Handle: RePEc:adl:wpaper:2012-01
Contact details of provider: Postal:
Adelaide SA 5005

Phone: (618) 8303 5540
Web page: http://www.economics.adelaide.edu.au/

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  1. Rogerson, Richard, 1988. "Indivisible labor, lotteries and equilibrium," Journal of Monetary Economics, Elsevier, vol. 21(1), pages 3-16, January.
  2. Lawrence J. Christiano & Cosmin Ilut & Roberto Motto & Massimo Rostagno, 2010. "Monetary policy and stock market booms," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 85-145.
  3. Pengfei Wang, 2012. "Understanding Expectation‐Driven Fluctuations: A Labor‐Market Approach," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 44, pages 487-506, 03.
  4. Yi-Chan Tsai, 2010. "News Shocks and Costly Technology Adoption," 2010 Meeting Papers 567, Society for Economic Dynamics.
  5. Michael Keane & Richard Rogerson, 2012. "Micro and Macro Labor Supply Elasticities: A Reassessment of Conventional Wisdom," Journal of Economic Literature, American Economic Association, vol. 50(2), pages 464-476, June.
  6. Nutahara, Kengo, 2010. "Internal and external habits and news-driven business cycles," Economics Letters, Elsevier, vol. 107(2), pages 300-303, May.
  7. Benhabib, Jess & Wen, Yi, 2004. "Indeterminacy, aggregate demand, and the real business cycle," Journal of Monetary Economics, Elsevier, vol. 51(3), pages 503-530, April.
  8. 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.
  9. Beaudry, Paul & Portier, Franck, 2007. "When can changes in expectations cause business cycle fluctuations in neo-classical settings?," Journal of Economic Theory, Elsevier, vol. 135(1), pages 458-477, July.
  10. Marianne Baxter & Robert G. King, 1991. "Productive externalities and business cycles," Discussion Paper / Institute for Empirical Macroeconomics 53, Federal Reserve Bank of Minneapolis.
  11. Hansen, Gary D., 1985. "Indivisible labor and the business cycle," Journal of Monetary Economics, Elsevier, vol. 16(3), pages 309-327, November.
  12. King, Robert G. & Rebelo, Sergio T., 1999. "Resuscitating real business cycles," Handbook of Macroeconomics,in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 14, pages 927-1007 Elsevier.
  13. Alvarez-Pelaez, Maria J. & Diaz, Antonia, 2005. "Minimum consumption and transitional dynamics in wealth distribution," Journal of Monetary Economics, Elsevier, vol. 52(3), pages 633-667, April.
  14. Raj Chetty & Adam Guren & Day Manoli & Andrea Weber, 2011. "Are Micro and Macro Labor Supply Elasticities Consistent? A Review of Evidence on the Intensive and Extensive Margins," American Economic Review, American Economic Association, vol. 101(3), pages 471-475, May.
  15. Christopher Gunn & Alok Johri, 2011. "News and knowledge capital," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 14(1), pages 92-101, January.
  16. Nir Jaimovich & Sergio Rebelo, 2009. "Can News about the Future Drive the Business Cycle?," American Economic Review, American Economic Association, vol. 99(4), pages 1097-1118, September.
  17. Paul Beaudry & Bernd Lucke, 2010. "Letting Different Views about Business Cycles Compete," NBER Chapters,in: NBER Macroeconomics Annual 2009, Volume 24, pages 413-455 National Bureau of Economic Research, Inc.
  18. Alejandro Justiniano & Giorgio E. Primiceri, 2008. "The Time-Varying Volatility of Macroeconomic Fluctuations," American Economic Review, American Economic Association, vol. 98(3), pages 604-641, June.
  19. Valerie A. Ramey, 2011. "Identifying Government Spending Shocks: It's all in the Timing," The Quarterly Journal of Economics, Oxford University Press, vol. 126(1), pages 1-50.
  20. 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, 09.
  21. Christiano, Lawrence J & Eichenbaum, Martin, 1992. "Current Real-Business-Cycle Theories and Aggregate Labor-Market Fluctuations," American Economic Review, American Economic Association, vol. 82(3), pages 430-450, June.
  22. Karel Mertens & Morten Overgaard Ravn, 2011. "Understanding the Aggregate Effects of Anticipated and Unanticipated Tax Policy Shocks," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 14(1), pages 27-54, January.
  23. 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.
  24. Bencivenga, Valerie R, 1992. "An Econometric Study of Hours and Output Variation with Preference Shocks," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 33(2), pages 449-471, May.
  25. Michael Keane & Richard Rogerson, 2015. "Reconciling Micro and Macro Labor Supply Elasticities: A Structural Perspective," Annual Review of Economics, Annual Reviews, vol. 7(1), pages 89-117, 08.
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