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News about Aggregate Demand and the Business Cycle

Author

Listed:
  • 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)

Abstract

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.

Suggested Citation

  • Jang-Ting Guo & Anca-Ioana Sirbu & Mark Weder, 2012. "News about Aggregate Demand and the Business Cycle," School of Economics and Public Policy Working Papers 2012-01, University of Adelaide, School of Economics and Public Policy.
    • Handle: RePEc:adl:wpaper:2012-01
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    References listed on IDEAS

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    1. Yi-Chan Tsai, 2010. "News Shocks and Costly Technology Adoption," 2010 Meeting Papers 567, Society for Economic Dynamics.
    2. Nutahara, Kengo, 2010. "Internal and external habits and news-driven business cycles," Economics Letters, Elsevier, vol. 107(2), pages 300-303, May.
    3. 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.
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    Cited by:

    1. Munechika Katayama & Kwang Hwan Kim, 2018. "Intersectoral Labor Immobility, Sectoral Comovement, and News Shocks," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 50(1), pages 77-114, February.
    2. 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.
    3. Yong, Chen & Dingming, Liu, 2019. "How does government spending news affect interest rates? Evidence from the United States," Journal of Economic Dynamics and Control, Elsevier, vol. 108(C).
    4. Ali, Syed Zahid & Qureshi, Irfan A., 2021. "Anticipated versus unanticipated productivity shocks and hours-worked," International Review of Economics & Finance, Elsevier, vol. 72(C), pages 547-572.
    5. Christopher M. Gunn, 2018. "Overaccumulation, Interest, and Prices," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 50(2-3), pages 479-511, March.
    6. Tania Karamisheva, 2021. "Measuring the Business Cycle in Bulgaria," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 3, pages 17-38.
    7. Marinko Škare & Saša Stjepanović, 2016. "Measuring Business Cycles: A Review," Contemporary Economics, Vizja University, vol. 10(1), March.

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    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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