scholarly journals Ambiguous Business Cycles

2014 ◽  
Vol 104 (8) ◽  
pp. 2368-2399 ◽  
Author(s):  
Cosmin L. Ilut ◽  
Martin Schneider
Keyword(s):  
Business Cycles ◽  
Business Cycle ◽  
New Keynesian ◽  
Knightian Uncertainty ◽  
Cycle Model ◽  
Cycle Frequency ◽  
Uncertainty Shocks ◽  
Business Cycle Model ◽  
Macro Variables

This paper studies a New Keynesian business cycle model with agents who are averse to ambiguity (Knightian uncertainty). Shocks to confidence about future TFP are modeled as changes in ambiguity. To assess the size of those shocks, our estimation uses not only data on standard macro variables, but also incorporates the dispersion of survey forecasts about growth as a measure of confidence. Our main result is that TFP and confidence shocks together can explain roughly two thirds of business cycle frequency movements in the major macro aggregates. Confidence shocks account for about 70 percent of this variation. (JEL D81, D84, E12, E32)

Solving the Dynamic Stochastic General Equilibrium Model with Stochastic Volatility: An Application in China

2015 ◽  
Vol 19 (4) ◽  
pp. 508-513
Author(s):  
Shangfeng Zhang ◽  
◽  
Yuying Wang ◽  
Bing Xu ◽  
Keyword(s):  
Business Cycle ◽  
Stochastic Volatility ◽  
Equilibrium Model ◽  
Order Approximation ◽  
New Keynesian ◽  
Cycle Model ◽  
Negative Effects ◽  
Positive Effects ◽  
Dynamic Stochastic ◽  
Business Cycle Model

A first-order approximation technique is not suited to handle issues such as welfare comparison, time-varying variance. Following Schmitt-Grohe and Uribe [1], in this paper, we derive a second-order approximation to estimate the dynamic stochastic equilibrium model with stochastic volatility, to capture the different impacts of the level shocks and the volatility shocks. Furthermore, the paper presents an application of standard quantitative New Keynesian business cycle model, and the results shows the negative effects of stochastic volatility shocks. Furthermore, the paper presents an application of standard quantitative New Keynesian business cycle model, and the empirical results find that the level shocks have positive effects on consumption, investment and output, while the volatility shocks have negative effects on consumption, investment and output.

scholarly journals Plant-Level Irreversible Investment and Equilibrium Business Cycles

2002 ◽  
Vol 92 (1) ◽  
pp. 181-197 ◽  
Author(s):  
Marcelo L Veracierto
Keyword(s):  
Business Cycles ◽  
Business Cycle ◽  
Real Business Cycle ◽  
Aggregate Fluctuations ◽  
Cycle Model ◽  
Irreversible Investment ◽  
Business Cycle Model ◽  
Plant Level ◽  
Aggregate Dynamics ◽  
Real Business Cycle Model

This paper evaluates the importance of microeconomic irreversibilities for aggregate dynamics using a real-business-cycle (RBC) model characterized by investment irreversibilities at the establishment level. The main finding is that investment irreversibilities do not play a significant role in an otherwise standard real-business-cycle model: Even though investment irreversibilities are crucial for establishment-level dynamics, aggregate fluctuations are basically the same under fully flexible or completely irreversible investment.

scholarly journals Endogenous Business Cycles and the Dynamics of Output, Hours, and Consumption

2000 ◽  
Vol 90 (5) ◽  
pp. 1136-1159 ◽  
Author(s):  
Stephanie Schmitt-Grohé
Keyword(s):  
Business Cycles ◽  
Business Cycle ◽  
Returns To Scale ◽  
Real Business Cycle ◽  
Cycle Model ◽  
Increasing Returns To Scale ◽  
Endogenous Business Cycles ◽  
Business Cycle Model ◽  
The Business Cycle ◽  
Dynamic Element

This paper studies the business-cycle fluctuations predicted by a two-sector endogenous-business-cycle model with sector-specific external increasing returns to scale. It focuses on aspects of actual fluctuations that have been identified both as defining features of business cycles and as ones standard real-business-cycle models cannot explain. For empirically realistic calibrations of the degree of returns to scale, the results suggest that endogenous fluctuations do not provide the dynamic element that is missing in existing real-business-cycle models. (JEL E32)

NEWS ABOUT TAXES AND EXPECTATIONS-DRIVEN BUSINESS CYCLES

2017 ◽  
Vol 23 (4) ◽  
pp. 1340-1370
Author(s):  
Anca-Ioana Sirbu
Keyword(s):  
Business Cycles ◽  
Business Cycle ◽  
Income Tax ◽  
Good News ◽  
Real Business Cycle ◽  
Tax Rates ◽  
Capital Income ◽  
Cycle Model ◽  
Business Cycle Model ◽  
Real Business Cycle Model

This paper analyzes the possibility of expectations-driven business cycles to emerge in a one-sector real business cycle model if the unique driving force is news about future income tax rates. We find that good news about labor income tax rates cannot generate expectations-driven business cycles, whereas good news about capital income tax rates can. We show that a one-sector real business cycle model enriched with (i) variable capital utilization and (ii) investment adjustment costs and driven solely by news shocks about capital income tax rates is able to generate qualitatively and quantitatively realistic business cycle fluctuations. In contrast to numerous studies in the news-driven business cycle literature, our model maintains separable preferences.

scholarly journals Man-Bites-Dog Business Cycles

2014 ◽  
Vol 104 (8) ◽  
pp. 2320-2367 ◽  
Author(s):  
Kristoffer P. Nimark
Keyword(s):  
Business Cycles ◽  
Business Cycle ◽  
Large Change ◽  
Cycle Model ◽  
Cross Sectional ◽  
Macroeconomic Volatility ◽  
Positive Correlation ◽  
The Cross ◽  
Business Cycle Model ◽  
The Business Cycle

The newsworthiness of an event is partly determined by how unusual it is and this paper investigates the business cycle implications of this fact. Signals that are more likely to be observed after unusual events may increase both uncertainty and disagreement among agents. In a simple business cycle model, such signals can explain why we observe (i) occasional large changes in macroeconomic aggregate variables without a correspondingly large change in underlying fundamentals, (ii) persistent periods of high macroeconomic volatility and, (iii) a positive correlation between absolute changes in macrovariables and the cross-sectional dispersion of survey expectations. (JEL D81, D82, D84, E23, E31, E32)

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