Business Cycle Comovement
نویسندگان
چکیده
Aggregate Shocks or Aggregate Information? Costly Information and Business Cycle Comovement When similar patterns of expansion and contraction are observed across sectors, we call this a business cycle. Yet explaining the similarity and synchronization of these cycles across industries remains a puzzle. Whereas output growth across industries is highly correlated, identifiable shocks, like shocks to productivity, are far less correlated. While previous work has examined complementarities in production, we propose that sectors make similar input decisions because of complementarities in information acquisition. Because information about driving forces has a high fixed cost of production and a low marginal cost of replication, it can be more efficient for firms to share the cost of discovering common shocks than to invest in uncovering detailed sectoral information. Firms basing their decisions on this common information make highly correlated production choices. This mechanism amplifies the effects of common shocks, relative to sectoral shocks. JEL Classification: E32, D82
منابع مشابه
Business cycle comovement in the G-7: common shocks or common transmission mechanisms?
What are the sources of macroeconomic comovement among G-7 countries? Two main candidate explanations may be singled out: common shocks and common transmission mechanisms. In the paper it is shown that they are complementary, rather than alternative, explanations. By means of a large-scale factor vector autoregressive (FVAR) model, allowing for full economic and statistical identi...cation of a...
متن کاملLabor Supply Heterogeneity and Macroeconomic Comovement
Standard real business cycle models must rely on total factor productivity (TFP) shocks to explain the observed comovement of consumption, investment, and hours worked. This paper shows that a neoclassical model consistent with observed heterogeneity in labor supply and consumption can generate comovement in the absence of TFP shocks. Intertemporal substitution of goods and leisure induces como...
متن کاملThe Business Cycle and Industry Comovement
T he U.S. economy, as of the writing of this article, is in its longest postwar expansion. This expansion has prompted various proponents to declare a “new” economy and the death of the business cycle. These pronouncements may well turn out to be premature, as similar announcements have proved in the past. In this case we can already say that the current expansion shares one feature with all pr...
متن کاملFirm Volatility and Credit: A Macroeconomic Analysis
This paper examines a tractable real business cycle model with idiosyncratic productivity shocks and binding credit constraints on entrepreneurs. The model shows how firm volatility increases in combination with credit market development. It further generates the observed comovement of credit and firm volatility with output at business cycle frequencies in response to aggregate productivity sho...
متن کاملGlobalization and Business Cycle Synchronization:
This paper empirically investigates the impact of globalization on the business cycle comovement of individual US states with the rest of the national economy and with the rest of world. Regressions with panel data over the period 1990-2005 provide strong evidence in support of the conventional wisdom that rising global integration over time, through either trade or foreign direct investment fl...
متن کامل