Shocks and Business Cycles

David Frankel and Burdzy Krzysztof
Additional contact information
Burdzy Krzysztof: University of Washington, burdzy@math.washington.edu

The B.E. Journal of Theoretical Economics, 2005, vol. 5, issue 1, 88

Abstract: A popular theory of business cycles is that they are driven by animal spirits: shifts in expectations brought on by sunspots. A prominent example is Howitt and McAfee (AER, 1992). We show that this model has a unique equilibrium if there are payoff shocks of any size. This equilibrium still has the desirable property that recessions and expansions can occur without any large exogenous shocks. We give an algorithm for computing the equilibrium and study its comparative statics properties. This work generalizes Burdzy, Frankel, and Pauzner (2000) to the case of endogenous frictions and seasonal and mean-reverting shocks.

Keywords: Business Fluctuations and Cycles; Stochastic and Dynamic Games (search for similar items in EconPapers)
Date: 2005
References: View complete reference list from CitEc
Citations: View citations in EconPapers (19)

Downloads: (external link)
https://doi.org/10.2202/1534-5963.1140 (text/html)
For access to full text, subscription to the journal or payment for the individual article is required.

Related works:
Working Paper: Shocks and Business Cycles (2005)
Working Paper: Shocks and Business Cycles (2001)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bpj:bejtec:v:advances.5:y:2005:i:1:n:2

Ordering information: This journal article can be ordered from
https://www.degruyter.com/journal/key/bejte/html

DOI: 10.2202/1534-5963.1140

Access Statistics for this article

The B.E. Journal of Theoretical Economics is currently edited by Burkhard C. Schipper

More articles in The B.E. Journal of Theoretical Economics from De Gruyter
Bibliographic data for series maintained by Peter Golla ().