News and Business Cycles in Open Economies

Nir Jaimovich and Sergio Rebelo ()

No 13444, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Aggregate and sectoral comovement are central features of business cycle data. Therefore, the ability to generate comovement is a natural litmus test for macroeconomic models. But it is a test that most existing models fail. In this paper we propose a unified model that generates both aggregate and sectoral comovement in response to contemporaneous shocks and news shocks about fundamentals. The fundamentals that we consider are aggregate and sectoral TFP shocks as well as investment-specific technical change. The model has three key elements: variable capital utilization, adjustment costs to investment, and a new form of preferences that allow us to parameterize the strength of short-run wealth effects on the labor supply.

JEL-codes: F3 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec, nep-dge and nep-mac
Date: 2007-09
Note: EFG IFM
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Related works:
Working Paper: News and Business Cycles in Open Economies (2007)
Journal Article: News and Business Cycles in Open Economies (2008)
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