Expectation-Driven Cycles: Time-varying Effects

Antonello D'Agostino and Caterina Mendicino

MPRA Paper from University Library of Munich, Germany

Abstract: This paper provides new insights into expectation-driven cycles by estimating a structural VAR with time-varying coefficients and stochastic volatility. We use survey-based expectations of the unemployment rate to measure expectations of future developments in economic activity. We find that the effect of expectation shocks on the realized unemployment rate have been particularly large during the most recent recession. Unanticipated changes in expectations contributed to the gradual increase in the persistence of the unemployment rate and to the decline in the correlation between the inflation and the unemployment rate over time. Our results are robust to the introduction of financial variables in the model.

Keywords: Survey Expectations; Economic Fluctuations; Stochastic Volatility; Time Varying Vector Autoregression (search for similar items in EconPapers)
JEL-codes: C32 E24 E32 (search for similar items in EconPapers)
Date: 2014-02
New Economics Papers: this item is included in nep-mac, nep-ore and nep-sog
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/53607/1/MPRA_paper_53607.pdf original version (application/pdf)

Related works:
Working Paper: Expectation-driven cycles: Time-Varying Effects (2016)
Working Paper: Expectation-driven cycles: time-varying effects (2015)
Working Paper: Expectation-Driven Cycles: Time-varying Effects (2015)
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:pra:mprapa:53607

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().