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What's News in Business Cycles

Author

Listed:
  • Martin Uribe

    (Columbia University)

  • Stephanie Schmitt-Grohe

    (Columbia University)

Abstract

Each of these driving forces is buffeted by four types of structural innovations: unanticipated innovations and innovations anticipated one, two, and three quarters in advance. We find that anticipated shocks account for more than two thirds of predicted aggregate fluctuations. We estimate that neutral productivity shocks are the most important source of business cycles and that investment-specific productivity shocks and government spending shocks play a minor role. The importance of investment-specific shocks depends crucially on whether or not the relative price of investment goods is included in the set of observables. Our baseline estimation includes the price of investment. Treating the price of investment as unobservable raises the importance of investment-specific shocks in explaining output variations from near zero to about 35 percent.

Suggested Citation

  • Martin Uribe & Stephanie Schmitt-Grohe, 2009. "What's News in Business Cycles," 2009 Meeting Papers 135, Society for Economic Dynamics.
    • Handle: RePEc:red:sed009:135
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    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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