Can News About the Future Drive the Business Cycle?∗
نویسندگان
چکیده
We propose a model that generates an economic expansion following good news about future total factor productivity (TFP) or investmentspecific technical change. The model has three key elements: variable capital utilization, adjustment costs to investment, and preferences that exhibit a weak short-run wealth effect on the labor supply. These preferences nest, as special cases, the two classes of utility functions most widely used in the business cycle literature. Our model generates recessions that resemble those of the post-war U.S. economy without relying on negative productivity shocks. Recessions are caused not by contemporaneous negative shocks but by lackluster news about future TFP or investment-specific technical change. J.E.L. Classification: E3. ∗We thank Gadi Barlevy, Paul Beaudry, Larry Christiano, Fabrice Collard, Wouter Denhaan, Martin Eichenbaum, Erin Hoge, Navin Kartik, Benjamin Malin, Franck Portier, and Laura Veldkamp for their comments. †Stanford University. ‡Northwestern University, NBER and CEPR.
منابع مشابه
News and knowledge capital
Under the assumption that knowledge is endogenously produced through a learning-by-doing process, we show that a standard one-sector real business cycle model augmented with only a learning-by-doing technology can exhibit an expectations-driven business cycle in response to news about a future temporary change in total factor productivity. News about future productivity immediately increases th...
متن کاملNews Shocks and Business Cycles
T he discussion surrounding the recent deep recession seems to have shifted the focus from currently used business cycle models to the standard Keynesian model (by which we mean the “old Keynesian,” as opposed to the new Keynesian, model). In the Keynesian model, pessimism among consumers and investors about the economy will simultaneously lower aggregate consumption and aggregate investment, a...
متن کاملExamining news shocks
A fundamental discrepancy surrounds news shocks, that is, a-priori information agents receive about developments in the economy. Whereas news shocks appear relevant empirically, in theoretical real-business-cycle models news about future total factor productivity generates counterfactual predictions. In standard real-business-cycle models these predictions emerge on top of the failures in this ...
متن کاملPerceptions of EAP for Business: Fresh Findings from Academia and Workplace
In a scholarly convention, ESP has bilaterally focused on “academic” and “occupational” arenas leaving the symbiosis between the two almost untouched. The present study, thus, aims to weigh the concordance between what is taught in universities as EAP courses for B.A. students in Business and Economics and what English skills and abilities are, actually, required from them on the job. A...
متن کاملObserved Expectations, News Shocks, and the Business Cycle
Abstract. This paper exploits information from the term structure of survey expectations to identify news shocks in a a DSGE model with rational expectations. We estimate a structural business-cycle model with price and wage stickiness. We allow for both unanticipated and anticipated components (“news”) in each structural disturbance: neutral and investment-specific technology shocks, governmen...
متن کامل