Can news about the future drive the business cycle?
By: Nir Jaimovich, Sergio Rebelo
Contributors: Jaimovich, Nir; Rebelo, Sergio; National Bureau of Economic Research
Series: NBER working paper series -- working paper 12537; Working paper series (National Bureau of Economic Research : Online) -- working paper no. 12537.
Publisher: National Bureau of Economic Research
Published: 2006
Place of publication: Cambridge, MA
Language: eng
Format: [electronic resource] /
Description: "We propose a model that generates an economic expansion in response to good news about future total factor productivity (TFP) or investment-specific 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 the two classes of utility functions most widely used in the business cycle literature as special cases.  Our model can generate recessions that resemble those of the post-war U.S.  economy without relying on negative productivity shocks.  The recessions are caused not by contemporaneous negative shocks but rather by lackluster news about future TFP or investment-specific technical change"--National Bureau of Economic Research web site.
Notes: Title from PDF file as viewed on 10/12/2006.

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