What's News in Business Cycles

Stephanie Schmitt-Grohe and Martín Uribe ()

No 14215, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: In this paper, we perform a structural Bayesian estimation of the contribution of anticipated shocks to business cycles in the postwar United States. Our theoretical framework is a real-business-cycle model augmented with four real rigidities: investment adjustment costs, variable capacity utilization, habit formation in consumption, and habit formation in leisure. Business cycles are assumed to be driven by permanent and stationary neutral productivity shocks, permanent investment-specific shocks, and government spending shocks. Each of these shocks is buffeted by four types of structural innovations: unanticipated innovations and innovations anticipated one, two, and three quarters in advance. We find that anticipated shocks account for more than two thirds of predicted aggregate fluctuations. This result is robust to estimating a variant of the model featuring a parametric wealth elasticity of labor supply.

JEL-codes: C11 C51 E13 E32 (search for similar items in EconPapers)
Date: 2008-08
New Economics Papers: this item is included in nep-bec, nep-cba, nep-dge and nep-mac
Note: EFG
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Citations: View citations in EconPapers (91)

Published as What's News in Business Cycles by Stephanie Schmitt-Grohe and Martin Uribe, Econometrica 80, November 2012, 2733-2764.

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Related works:
Journal Article: What's News in Business Cycles (2012)
Working Paper: What's News in Business Cycles (2012)
Working Paper: What?s News in Business Cycles (2009)
Working Paper: What's News in Business Cycles (2009)
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