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...

A methodology based on the multivariate generalized Butterwoth filter for extracting the business cycles of the whole economy and of its productive sectors is developed. The method is then illustrated through an application to the Italian gross value added time series of the main economic sectors.

Equity price is cyclical and often leads the business cycle. These observations have led to the hypothesis that shocks to equity market liquidity are an independent source of the business cycle. In this paper I construct a tractable model to evaluate this hypothesis. After calibrating the model to the US data, I find that a negative liquidity shock in the equity market can generate large reduct...

In the context of a dynamic, stochastic, general equilibrium model, we perform classical maximum-likelihood and Bayesian estimations of the contribution of anticipated shocks to business cycles in the postwar United States. Our theoretical framework is a real-business-cycle model augmented with investment adjustment costs, variable capacity utilization, habit formation in consumption, and prefe...

This paper analyzes the quantitative importance of adaptive learning in business cycle fluctuations. We first introduce adaptive learning in a real business cycle model and a New Keynesian model, using specifications drawn from the literature which assume that agents learn about the equilibrium laws of motion. We consider a variety of learning rules, and find that in both environments learning ...

The aim of this paper is to test formally the classical business cycle hypothesis, using data from industrialized countries for the time period since 1960. The hypothesis is characterized by the view that the cyclical structure in GDP is concentrated in the investment series: xed investment has typically a long cycle, while the cycle in inventory investment is shorter. To check the robustness o...

Aggregate productivity falls in recessions and rises in expansions. Several empirical studies suggest that the systematic behavior of lending standards, with laxer (tighter) standards applied during expansions (recessions), is responsible for reverting trends in aggregate productivity. We build a dynamic model that rationalizes these findings. Higher liquidity brought about by high levels of ca...

This paper documents the dynamic properties of national output, its components, and the current account for five OECD countries. There is strong evidence of conditional volatility for almost all time series as well as significant deviations from normality. The deviations are detected particularly in GDP, net exports, investment time series. JEL Codes: