Uncertainty about the future rises in recessions. But is uncertainty a source of business cycle fluctuations or an endogenous response to them, and does the type of uncertainty matter? Answer: sharply higher uncertainty about real economic activity in recessions is fully an endogenous response to other shocks that cause business cycle fluctuations, while uncertainty about financial markets is a...

Building on the standard firm dynamics setup of Hopenhayn (1992), we develop a quantitative theory of aggregate fluctuations arising from idiosyncratic shocks to firm level productivity. This allows us to generalize the theoretical results in Gabaix (2011) to account for persistent micro-level shocks, optimal size decisions as well as endogenous firm entry and exit. We then use our model to pro...

It is often argued that changes in expectation are an important driving force of the business cycle. However, it is well known that changes in expectations cannot generate positive co-movement between consumption, investment and employment in the most standard neo-classical business cycle models. This gives rise to the question of whether changes in expectation can cause business cycle fluctuat...

The business cycle is a frequent topic in economic research; however, the approach based on individual strategies often remains neglected. aspiration of this study to prove that behavior individuals can originate and fuel an cycle. For purpose, we are using algorithm repeated dove–hawk game. results reveal sum output society affected by ratio strategies. Cyclical changes will be translated into...

In the immediate aftermath of global financial crisis, monetary policy in India became accommodative as other major economies, but subsequently turned highly contractionary despite falling inflation, which we characterize errors. Government expenditure also had similar pattern. This paper therefore estimates a medium scale New Keynesian model (with earnings and assets based collateral constrain...