Business Cycles: Derivation of Equations for Aggregate Fluctuations, Mean Risks and Mean Square Risks

There is a widespread belief that changes in expectations may be an important independent driver of economic fluctuations. The news view of business cycles offers a formalization of this perspective. In this paper we discuss mechanisms by which changes in agents' information, due to the arrival of news, can cause business cycle fluctuations driven by expectational change, and we review the empirical evidence aimed at evaluating their relevance. In particular, we highlight how the literature on news and business cycles offers a coherent way of thinking about aggregate fluctuations, while at the same time we emphasize the many challenges that must be addressed before a proper assessment of the role of news in business cycles can be established. (JEL D83, D84, E13, E32, O33)

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Debunking the granular origins of aggregate fluctuations: from real business cycles back to Keynes

Journal of Evolutionary Economics ◽

10.1007/s00191-018-0590-4 ◽

2018 ◽

Vol 29 (1) ◽

pp. 67-90 ◽

Cited By ~ 9

Author(s):

Giovanni Dosi ◽

Mauro Napoletano ◽

Andrea Roventini ◽

Tania Treibich

Keyword(s):

Business Cycles ◽

Aggregate Fluctuations ◽

Real Business Cycles

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The Aggregate Implications of Regional Business Cycles

Econometrica ◽

10.3982/ecta14243 ◽

2019 ◽

Vol 87 (6) ◽

pp. 1789-1833 ◽

Cited By ~ 7

Author(s):

Martin Beraja ◽

Erik Hurst ◽

Juan Ospina

Keyword(s):

Business Cycles ◽

Great Recession ◽

Aggregate Demand ◽

Strong Relationship ◽

Aggregate Data ◽

New Keynesian ◽

Aggregate Fluctuations ◽

Wage Dynamics ◽

The Great Recession ◽

Wage Stickiness

Making inferences about aggregate business cycles from regional variation alone is difficult because of economic channels and shocks that differ between regional and aggregate economies. However, we argue that regional business cycles contain valuable information that can help discipline models of aggregate fluctuations. We begin by documenting a strong relationship across U.S. states between local employment and wage growth during the Great Recession. This relationship is much weaker in U.S. aggregates. Then, we present a methodology that combines such regional and aggregate data in order to estimate a medium‐scale New Keynesian DSGE model. We find that aggregate demand shocks were important drivers of aggregate employment during the Great Recession, but the wage stickiness necessary for them to account for the slow employment recovery and the modest fall in aggregate wages is inconsistent with the flexibility of wages we observe across U.S. states. Finally, we show that our methodology yields different conclusions about the causes of aggregate employment and wage dynamics between 2007 and 2014 than either estimating our model with aggregate data alone or performing back‐of‐the‐envelope calculations that directly extrapolate from well‐identified regional elasticities.

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Individual Consumption Risk and the Welfare Cost of Business Cycles

The American Economic Review ◽

10.1257/aer.97.4.1488 ◽

2007 ◽

Vol 97 (4) ◽

pp. 1488-1506 ◽

Cited By ~ 40

Author(s):

Massimiliano De Santis

Keyword(s):

Business Cycles ◽

Idiosyncratic Risk ◽

Welfare Cost ◽

Aggregate Fluctuations ◽

Welfare Gain ◽

Aggregate Consumption ◽

Consumption Insurance ◽

Consumption Risk ◽

Consumption Fluctuations ◽

Overall Risk

We measure the welfare gain from removing aggregate consumption fluctuations in a model where each individual faces incomplete consumption insurance. We show that, because this welfare gain is a convex function of the overall consumption risk—aggregate plus idiosyncratic—each individual faces, to gauge the magnitude of the gain, it is important to match individuals' overall risk prior to any policy. In an economy calibrated to match individuals' overall risk, even removing 10 percent of aggregate fluctuations can result in a large welfare gain. Further, large gains do not necessarily depend on the countercyclical nature of idiosyncratic risk. (JEL E21, E32)

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Plant-Level Irreversible Investment and Equilibrium Business Cycles

The American Economic Review ◽

10.1257/000282802760015667 ◽

2002 ◽

Vol 92 (1) ◽

pp. 181-197 ◽

Cited By ~ 80

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.

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Technology, Employment, and the Business Cycle: Do Technology Shocks Explain Aggregate Fluctuations?

The American Economic Review ◽

10.1257/aer.89.1.249 ◽

1999 ◽

Vol 89 (1) ◽

pp. 249-271 ◽

Cited By ~ 782

Author(s):

Jordi Galí

Keyword(s):

Simple Model ◽

Business Cycles ◽

Business Cycle ◽

Monopolistic Competition ◽

Real Business Cycle ◽

Technology Shocks ◽

Aggregate Fluctuations ◽

G7 Countries ◽

Technology Shock ◽

The Business Cycle

I estimate a decomposition of productivity and hours into technology and non-technology components. Two results stand out: (a) the estimated conditional correlations of hours and productivity are negative for technology shocks, positive for nontechnology shocks; (b) hours show a persistent decline in response to a positive technology shock. Most of the results hold for a variety of model specifications, and for the majority of G7 countries. The picture that emerges is hard to reconcile with a conventional real-business-cycle interpretation of business cycles, but is shown to be consistent with a simple model with monopolistic competition and sticky prices. (JEL E32, E24)

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Sectoral Shocks and Unemployment Rate Fluctuations

The American Economist ◽

10.1177/056943459804200206 ◽

1998 ◽

Vol 42 (2) ◽

pp. 65-72

Author(s):

Carlos G. Elías

Keyword(s):

Business Cycles ◽

Unemployment Rate ◽

Decomposition Analysis ◽

First Year ◽

Aggregate Fluctuations ◽

Vector Autoregressive ◽

Sectoral Shocks ◽

Variance Decomposition Analysis ◽

Rbc Models ◽

Rule Out

In some Real Business Cycle (RBC) models it is possible to generate comovement between production of different sectors even if shocks are sector specific. Although this simulates a common feature of actual business cycles, it is not in itself evidence that business cycles are actually driven by an RBC phenomenon. In this paper, a Vector Autoregressive model is estimated. Variance decomposition analysis suggests that sectoral shocks are an important determinant of unemployment rate fluctuations. However, this does not rule out the importance of aggregate fluctuations, especially during the first year after the shock.

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Agency business cycles

Theoretical Economics ◽

10.3982/te3379 ◽

2020 ◽

Vol 15 (1) ◽

pp. 123-158

Author(s):

Mikhail Golosov ◽

Guido Menzio

Keyword(s):

Stochastic Process ◽

Business Cycles ◽

Economic Activity ◽

Aggregate Fluctuations ◽

Aggregate Shocks ◽

The Past ◽

Stochastic Fluctuations ◽

Ex Ante ◽

Randomization Process

We develop a theory of endogenous and stochastic fluctuations in economic activity. Individual firms choose to randomize over firing or keeping workers who performed poorly in the past to give them an ex ante incentive to exert effort. Different firms choose to correlate the outcome of their randomization to reduce the probability with which they fire nonperforming workers. Correlated randomization leads to aggregate fluctuations. Aggregate fluctuations are endogenous—they emerge because firms choose to randomize and they choose to randomize in a correlated fashion—and they are stochastic—they are the manifestation of a randomization process. The hallmark of a theory of endogenous and stochastic fluctuations is that the stochastic process for aggregate “shocks” is an equilibrium object.

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The Bordeaux Automatic Meridian Circle

International Astronomical Union Colloquium ◽

10.1017/s0252921100074170 ◽

1978 ◽

Vol 48 ◽

pp. 227-228

Author(s):

Y. Requième

Keyword(s):

Mean Square Error ◽

Mean Square ◽

Meridian Circle ◽

The Mean ◽

Full Automation

In spite of important delays in the initial planning, the full automation of the Bordeaux meridian circle is progressing well and will be ready for regular observations by the middle of the next year. It is expected that the mean square error for one observation will be about ±0.”10 in the two coordinates for declinations up to 87°.

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Indikatoren schulischen Wohlbefindens bei gesunden und chronisch kranken Kindern: Psychometrische Prüfung und Validierung adaptierter FEESS-Skalen

Zeitschrift für Pädagogische Psychologie ◽

10.1024/1010-0652/a000259 ◽

2020 ◽

Vol 34 (3-4) ◽

pp. 201-219

Author(s):

Kathleen Schnick-Vollmer ◽

Christiane Diefenbach ◽

Christine Gräf ◽

Dorle Hoffmann ◽

Isabell Hoffmann ◽

...

Keyword(s):

Item Response ◽

Mean Square ◽

Weighted Mean ◽

Externe Validität ◽

Chronisch Kranke

Zusammenfassung. Das schulbezogene Wohlbefinden (SBWB) ist eine wichtige Voraussetzung für schulischen Erfolg. Trotzdem existieren – insbesondere mit Blick auf die Erfassung des SBWB von Erstklässlern – im deutschsprachigen Raum nur vereinzelt Studien. Dies lässt sich möglicherweise durch das Fehlen geeigneter Instrumente begründen. Dies gilt auch und insbesondere dann, wenn der Gesundheitszustand der Kinder berücksichtigt werden soll. Das Ziel der vorliegenden Arbeit besteht in der Validierung des adaptierten Fragebogens zur Erfassung von emotionalen und sozialen Schulerfahrungen (FEESS 1 – 2; Rauer & Schuck, 2004 ) mit Fokus auf die Eignung des Instruments für chronisch kranke und gesunde Kinder. Dafür wird zunächst das Konstrukt Wohlbefinden (WB) resp. SBWB definiert und in einschlägige Theorien – die Selbstbestimmungstheorie nach Deci und Ryan (1985) und das Erwartung-mal-Wert-Modell nach Wigfield und Eccles (2000) – eingebettet. Die Bedeutung der verwendeten FEESS-Skalen und ihr Zusammenhang zum schulischen Erfolg werden aufgezeigt. 1491 Kinder wurden zu ihrer Lernfreude (LF), sozialen Integration (SI) und zu ihrem schulbezogenen Fähigkeitsselbstkonzept (SK) befragt. Die Erfassung des Gesundheitszustands wurde über Elternfragebögen und Schuleingangsuntersuchungen eruiert. Zudem wurden die Eltern zur gesundheitsbezogenen Lebensqualität (LQ) ihrer Kinder mit Hilfe eines Fragebogens zur Erfassung der Lebensqualität von Kindern (KINDL; Bullinger, Mackensen & Kirchberger, 1994 ) befragt. Die psychometrische Qualität der adaptierten FEESS-Skalen wurde für beide Gruppen (erkrankt / gesund) auf Skalen- und Itemebene untersucht. Hierzu kamen sowohl klassische Verfahren als auch Verfahren der Item-Response-Theorie zum Einsatz. Die Ergebnisse untermauern die Validität des Konstruktes SBWB und stützen die Annahme der Dreidimensionalität (LF, SI, SK). Alle drei Skalen zeigen eine zufriedenstellende bis sehr gute Reliabilität. Die Items zeigen sehr gute MNSQ-Werte (weighted mean-square; gewichtete Abweichungsquadrate) und geeignete Trennschärfen. Die externe Validität, für deren Berechnung der Zusammenhang zwischen den Angaben der Kinder und den Angaben der Eltern zur gesundheitsbezogenen LQ untersucht wurde, konnte noch nicht ausreichend nachgewiesen werden. Bis auf diese Einschränkung kann mit Hilfe der adaptierten FEESS-Skalen im nächsten Schritt das SBWB von gesunden und erkrankten Kindern verglichen werden, um mögliche Chancenungleichheiten auszugleichen.

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