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News about Aggregate Demand and the Business Cycle

  • 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
Date of revision:
Handle: RePEc:adl:wpaper:2012-01
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