Can News about the Future Drive the Business Cycle?
Nir Jaimovich and Sergio Rebelo
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| Article Citation |
Jaimovich, Nir, and Sergio Rebelo. 2009. "Can News about the Future Drive the Business Cycle?" American Economic Review, 99(4): 1097–1118.
DOI:10.1257/aer.99.4.1097
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| Abstract |
Aggregate and sectoral comovement are central features of business cycles, so
the ability to generate comovement is a natural litmus test for macroeconomic
models. But it is a test that most models fail. We propose a unified model that
generates aggregate and sectoral comovement in response to contemporaneous
and news shocks about fundamentals. The fundamentals that we consider are
aggregate and sectoral total factor productivity shocks as well as investment-specific
technical change. The model has three key elements: variable capital
utilization, adjustment costs to investment, and preferences that allow us to
parameterize the strength of short-run wealth effects on the labor supply. (JEL
E13, E20, E32)
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| Article Full-Text Access |
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| Additional Materials |
Download Data Set
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| Authors |
Jaimovich, Nir (Stanford U)
Rebelo, Sergio (Northwestern U)
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| JEL Classifications |
E13: General Aggregative Models: Neoclassical
E20: Macroeconomics: Consumption, Saving, Production, Employment, and Investment: General (includes Measurement and Data)
E32: Business Fluctuations; Cycles
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