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What is the major source of business cycles: Spillovers from land prices, investment shocks, or anything else?

Toyoichiro Shirota

Journal of Macroeconomics, 2018, vol. 57, issue C, 138-149

Abstract: Some recent studies argue that spillovers from land prices into the aggregate economy are the crucial drivers of business cycles. Other studies stress the importance of investment shocks at business cycle frequencies. This study evaluates these two strands of the literature in a single unified framework by estimating a New Keynesian dynamic stochastic general equilibrium model with a collateral constraint on investment financing. The results are twofold: (i) when these features are combined, neither shocks that drive most of land-price fluctuations nor investment shocks are the primary source of U.S. business cycles; and (ii) technology shocks play an important role in business cycles.

Keywords: Source of business cycles; Land price dynamics; Investment shock; Collateral constraint; Bayesian estimation (search for similar items in EconPapers)
JEL-codes: E32 E44 (search for similar items in EconPapers)
Date: 2018
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Handle: RePEc:eee:jmacro:v:57:y:2018:i:c:p:138-149