Policy risk and the business cycle

Entrepreneurial Activity, Risk and the Business Cycle∗

This paper analyzes a model in which the risk associated with entrepreneurial activity implies that the amount of such activity is procyclical and results in both amplification and intertemporal propagation of productivity shocks. In the model risk averse agents choose between a riskless project and a risky project with higher expected return (‘the entrepreneurial activity’). Agents who choose ...

Business Cycle Features In The Iranian Economy

Jordi Galí : Monetary Policy , Inflation , and the Business Cycle

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Business - cycle consumption risk and asset prices ∗

We disaggregate consumption growth into components with different levels of persistence and show that a single business-cycle consumption factor can explain satisfactorily the differences in risk premia across book-to-market and size-sorted portfolios. We argue that accounting for persistence heterogeneity in consumption is important for interpreting cross-sectional risk compensations in financ...

Fiscal policy over the real business cycle: A positive theory

This paper presents a political economy theory of the behavior of fiscal policy over the business cycle. The theory predicts that, in both booms and recessions, fiscal policies are set so that the marginal cost of public funds obeys a submartingale. In the short run, fiscal policy can be pro-cyclical with government debt spiking up upon entering a boom. However, in the long run, fiscal policy i...