Expectation-driven boom-bust cycles

Marco Brianti and Vito Cormun

Journal of Monetary Economics, 2024, vol. 146, issue C

Abstract: Using data from the Survey of Professional Forecasters, we observe that a large fraction of analysts’ expectations about future economic growth is not due to technology or other shocks to fundamentals measured by the business cycle literature. We find that these unexplained changes in forecast revisions predict significant boom-bust dynamics in the key macroeconomic aggregates. We offer a novel theory where boom-bust dynamics stem from expectation shocks orthogonal to fundamentals.

Keywords: Animal spirit; Boom bust; Business cycle; Sunspot (search for similar items in EconPapers)
JEL-codes: C32 E32 (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (4)

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Working Paper: Expectation-Driven Boom-Bust Cycles (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:146:y:2024:i:c:s030439322400028x

DOI: 10.1016/j.jmoneco.2024.103575

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