Demand shocks and economic fluctuations
This paper studies conditions under which demand-side shocks can generate realistic business cycles in RBC models. Although highly persistent demand shocks are necessary for generating procyclical investment, variable capacity utilization and habit formation can reduce the required degree of persistence.
|Date of creation:||2006|
|Date of revision:|
|Publication status:||Published in Economics Letters, March 2006, 90(3), pp. 373-83|
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