News about Aggregate Demand and the Business Cycle

Jang-Ting Guo, Anca-Ioana Sirbu and Mark Weder
Additional contact information
Anca-Ioana Sirbu: Western Washington University

No 201414, Working Papers from University of California at Riverside, Department of Economics

Abstract: We examine the plausibility of expectations-driven cyclical fluctuations in an otherwise standard one-sector real business cycle model with variable capital utilization and mild increasing returns-to-scale in production. Due to a dominating wealth effect, our model is able to generate qualitatively as well as quantitatively realistic aggregate fluctuations driven by news impulses to future consumption demand or government spending on goods and services. When the economy is subject to anticipated total factor productivity or investment-specific technology shocks, the relative strength of the intertemporal substitution effect needs to be enhanced for our model to exhibit positive macroeconomic co-movement and business cycle statistics that are consistent with the data.

Keywords: News Shocks; Aggregate Demand; Business Cycles. (search for similar items in EconPapers)
JEL-codes: E32 (search for similar items in EconPapers)
Date: 2014-09
New Economics Papers: this item is included in nep-bec, nep-dge and nep-mac
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Citations: View citations in EconPapers (3)

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https://economics.ucr.edu/repec/ucr/wpaper/201414.pdf First version, 2014 (application/pdf)

Related works:
Journal Article: News about aggregate demand and the business cycle (2015)
Working Paper: News about Aggregate Demand and the Business Cycle (2014)
Working Paper: News about Aggregate Demand and the Business Cycle (2012)
Working Paper: News about Aggregate Demand and the Business Cycle (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:ucr:wpaper:201414

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