Demand Shocks and Economic Fluctuations
نویسنده
چکیده
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. Keywords: Demand Shocks; Halls Residual; Real Business Cycles; Crowding Out; Investment Dynamics. JEL Classi cation: E12, E13, E21, E22, E32. This paper draws heavily from the rst part of an earlier working paper, Fickle Consumers Versus Random Technology: Explaining Domestic and International Comovements (Yi Wen, Cornell University, 2002). The views expressed are those of the author and do not reect o¢ cial positions of the Federal Reserve System. Correspondence: Yi Wen, Research Department, Federal Reserve Bank of St. Louis, P.O. Box 442, St. Louis, MO 63166.
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