- American Economic Journal: Macroeconomics (Forthcoming)
Current and expected unemployment rates contain information
that is highly useful to estimate the effect of news about TFP
and to allow a general equilibrium rational expectations model to
generate Pigouvian cycles: a large fraction of the comovement of
output, consumption, investment, employment, and real wages is
explained by noise about TFP. These results emerge because of
the low frequency negative relationship between unemployment and
TFP growth. The model predicts that the start (end) of most U.S.
recessions is associated with agents realizing that previous enthusiastic (lukewarm) expectations about future TFP would not be met.
Forthcoming Article Downloads