scholarly journals Can News about the Future Drive the Business Cycle?

2009 ◽  
Vol 99 (4) ◽  
pp. 1097-1118 ◽  
Author(s):  
Nir Jaimovich ◽  
Sergio Rebelo
Keyword(s):  
Adjustment Costs ◽  
Wealth Effects ◽  
Factor Productivity ◽  
News Shocks ◽  
Productivity Shocks ◽  
Macroeconomic Models ◽  
Short Run ◽  
The Business Cycle ◽  
Litmus Test ◽  
Total Factor Productivity Shocks

Aggregate and sectoral comovement are central features of business cycles, so the ability to generate comovement is a natural litmus test for macroeconomic models. But it is a test that most models fail. We propose a unified model that generates aggregate and sectoral comovement in response to contemporaneous and news shocks about fundamentals. The fundamentals that we consider are aggregate and sectoral total factor productivity shocks as well as investment-specific technical change. The model has three key elements: variable capital utilization, adjustment costs to investment, and preferences that allow us to parameterize the strength of short-run wealth effects on the labor supply. (JEL E13, E20, E32)

scholarly journals Market Exposure and Endogenous Firm Volatility over the Business Cycle

2016 ◽  
Vol 8 (1) ◽  
pp. 148-198 ◽  
Author(s):  
Ryan A. Decker ◽  
Pablo N. D'Erasmo ◽  
Hernan Moscoso Boedo
Keyword(s):  
Theoretical Model ◽  
Business Cycle ◽  
Total Factor Productivity ◽  
Factor Productivity ◽  
Firm Level ◽  
Productivity Shocks ◽  
Demand Shocks ◽  
The Business Cycle ◽  
Total Factor Productivity Shocks

We propose a theory of endogenous firm-level risk over the business cycle based on endogenous market exposure. Firms that reach a larger number of markets diversify market-specific demand shocks at a cost. The model is driven only by total factor productivity shocks and captures the observed countercyclity of firm-level risk. Using a panel of US firms we show that, consistent with our theoretical model, measures of market reach are procyclical, and the counter-cyclicality of firm-level risk is driven by those firms that adjust their market exposure, which are larger than those that do not. (JEL D21, D22, E23, E32, L25)

Short Run Comovement, Persistent Shocks and the Business Cycle / Eine empirische Analyse der Wirkung kurz- und langfristiger Schocks im Konjunkturzyklus

1998 ◽  
Vol 217 (4) ◽  
Author(s):  
Jörg Breitung ◽  
Maik Heinemann
Keyword(s):  
Business Cycle ◽  
Rational Expectations ◽  
Impulse Response Functions ◽  
Business Cycle Theory ◽  
Productivity Shocks ◽  
Business Cycle Fluctuations ◽  
Long Run ◽  
Short Run ◽  
The Business Cycle ◽  
System Variables

SummaryFollowing standard real business cycle theory, long run economic growth and short run business cycle fluctuations are attributed to a series of productivity shocks propagated by the economic system which is assumed to be in a rational expectations equilibrium. Characterizing the technical progress as the common stochastic trend we are able to investigate the short and long run effects of the productivity shocks using a cointegrated system. From the empirical analysis it emerges that the long run relationship between the system variables can be traced back to a single permanent component which is interpreted as a measure of technological progress. The short run dynamic impact of the permanent innovations is investigated using the empirical impulse response functions. It turns out that the permanent shocks are able to explain a substantial portion of business cycle fluctuations.

Technological Innovation, Intangible Capital, and Asset Prices

2019 ◽  
Vol 11 (1) ◽  
pp. 221-242 ◽  
Author(s):  
Leonid Kogan ◽  
Dimitris Papanikolaou
Keyword(s):  
Human Capital ◽  
Asset Pricing ◽  
Total Factor Productivity ◽  
Technological Innovation ◽  
Intangible Capital ◽  
Factor Productivity ◽  
Productivity Shocks ◽  
Total Factor Productivity Shocks ◽  
Financial Securities

We review research on the asset pricing implications of models with innovation and intangible capital. In these models, technological innovation shocks propagate differently than standard total factor productivity shocks—and therefore have qualitatively distinct asset pricing implications. We discuss recent approaches to measuring intangible capital and innovation, many of which rely on the prices of financial securities. Last, we review models that explore the economic differences between intangible and innovation relative to other forms of investments—focusing on the role of human capital and cash-flow appropriability.

What drives pension reforms in the OECD?

2020 ◽  
Vol 35 (102) ◽  
pp. 357-402 ◽  
Author(s):  
Roel Beetsma ◽  
Franc Klaassen ◽  
Ward Romp ◽  
Ron van Maurik
Keyword(s):  
Business Cycle ◽  
Conceptual Framework ◽  
Pension Reform ◽  
Adjustment Costs ◽  
Oecd Countries ◽  
Policy Implications ◽  
Pension Reforms ◽  
Short Run ◽  
The Business Cycle ◽  
Country Specific

SUMMARY Based on narrative identification, we construct a novel comprehensive dataset of pension reform measures in OECD countries from 1970 to 2017. We then study the timing of these measures. Our main and new result is that business cycle indicators are important for their timing: a worsening makes contractionary measures more likely and expansionary measures less likely. The demography matters only in the sense that the OECD-wide demography explains the general reform trend for a country. We find no evidence that country-specific or short-run demographic developments matter. We discuss a conceptual framework with adjustment costs of changing pension generosity that can account for both the reform responsiveness to the business cycle and the lack of responsiveness to changes in demographic forecasts. We also discuss potential policy implications of our findings.

Nonlinear Dynamics and Chaos: Application to Financial Markets in Pakistan

1994 ◽  
Vol 33 (4II) ◽  
pp. 1417-1429 ◽  
Author(s):  
Nasir M. Khiui
Keyword(s):  
Financial Markets ◽  
Chaotic Dynamics ◽  
Ad Hoc ◽  
Linear Models ◽  
Brain Research ◽  
Economic Data ◽  
Differential Equation Models ◽  
Short Run ◽  
The Business Cycle ◽  
Random Shocks

Recently there has been an increased interest in the theory of chaos by macroeconomists and fmancial economists. Originating in the natural sciences, applications of the theory have spread through various fields including brain research, optics, metereology, and economics. The attractiveness of chaotic dynamics is its ability to generate large movements which appear to be random, with greater frequency than linear models. Two of the most striking features of any macro-economic data are its random-like appearance and its seemingly cyclical character. Cycles in economic data have often been noticed, from short-run business cycles, to 50 years Kodratiev waves. There have been many attempts to explain them, e.g. Lucas (1975), who argues that random shocks combined with various lags can give rise to phenomena which have the appearance of cycles, and Samuelson (1939) who uses the familiar multiplier accelerator model. The advantage of using non-linear difference (or differential) equation models to explain the business cycle is that it does not have to rely on ad hoc unexplained exogenous random shocks.

Reforming the Labour Market in Good and Bad Times

2018 ◽  
Author(s):  
Britta Gehrke ◽  
Enzo Weber
Keyword(s):  
Time Series ◽  
Business Cycle ◽  
Labour Market ◽  
Markov Switching ◽  
Matching Theory ◽  
Market Reforms ◽  
Structural Reforms ◽  
Labour Market Reforms ◽  
Short Run ◽  
The Business Cycle

This chapter discusses how the effects of structural labour market reforms depend on whether the economy is in expansion or recession. Based on an empirical time series model with Markov switching that draws on search and matching theory, we propose a novel identification of reform outcomes and distinguish the effects of structural reforms that increase the flexibility of the labour market in distinct phases of the business cycle. We find in applications to Germany and Spain that reforms which are implemented in recessions have weaker expansionary effects in the short run. For policymakers, these results emphasize the costs of introducing labour market reforms in recessions.

scholarly journals Asset Returns, the Business Cycle and the Labor Market

2013 ◽  
Vol 14 (3) ◽  
pp. 372-397 ◽  
Author(s):  
Burkhard Heer ◽  
Alfred Maußner
Keyword(s):  
Labor Market ◽  
Business Cycle ◽  
Equity Premium ◽  
Working Hours ◽  
New Keynesian ◽  
Monetary Shocks ◽  
Productivity Shocks ◽  
New Keynesian Models ◽  
The Business Cycle ◽  
Sticky Wages

Abstract We review the labor market implications of recent real-business cycle and New Keynesian models that successfully replicate the empirical equity premium. We document the fact that all models reviewed in this article that do not feature either sticky wages or immobile labor between two production sectors as in Boldrin et al. (2001) imply a negative correlation of working hours and output that is not observed empirically. Within the class of Neo-Keynesian models, sticky prices alone are demonstrated to be less successful than rigid nominal wages with respect to the modeling of the labor market stylized facts. In addition, monetary shocks in these models are required to be much more volatile than productivity shocks to match statistics from both the asset and labor market.

Determinants of Total Factor Productivity in Mexico, Indonesia, Nigeria, and Turkey (1980–2014)

2018 ◽  
Vol 4 (2) ◽  
pp. 192-217 ◽  
Author(s):  
Phillip Akanni Olomola ◽  
Tolulope Temilola Osinubi
Keyword(s):  
Human Capital ◽  
Total Factor Productivity ◽  
Negative Relationship ◽  
Annual Data ◽  
Factor Productivity ◽  
Distributed Lag ◽  
Long Run ◽  
The World ◽  
Government Stability ◽  
Short Run

This study analyzed the macroeconomic and institutional determinants of total factor productivity (TFP) in the MINT (Mexico, Indonesia, Nigeria, and Turkey) countries during the period 1980–2014. Annual data covering the period between 1980 and 2014 were used. Data on real gross domestic product (real GDP), labor force, gross fixed capital formation, foreign direct investment (FDI), human capital, and inflation were sourced from the World Development Indicators published by the World Bank. Also, data on corruption, government stability, and law and order were obtained from the database of International Country Risk Guide. Panel autoregressive distributed lag (PARDL) regression technique was used to estimate the model. Results showed that TFP growth rate declined on average by 1.4 per cent and 1.8 per cent in Mexico and Turkey, respectively, while Indonesia and Nigeria did not experience productivity growth on the average. Results also showed that in the long run, human capital and government stability had positive and significant effects on TFP, while FDI and corruption had negative but significant effects on TFP. In the short run, there existed a significant negative relationship between TFP and inflation. However, the effects of human capital and corruption on TFP were positive and significant. The study concluded that human capital and corruption were key drivers of TFP in the MINT countries both in the long run and short run.

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