What's News in Business Cycles

39 Pages Posted: 28 Sep 2012

See all articles by Stephanie Schmitt-Grohé

Stephanie Schmitt-Grohé

Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Martín Uribe

Columbia University - Graduate School of Arts and Sciences - Department of Economics; National Bureau of Economic Research (NBER)

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Date Written: May 2012

Abstract

In the context of a dynamic, stochastic, general equilibrium model, we perform classical maximum-likelihood and Bayesian estimations of the contribution of anticipated shocks to business cycles in the postwar United States. Our identification approach relies on the fact that forward-looking agents react to anticipated changes in exogenous fundamentals before such changes materialize. It further allows us to distinguish changes in fundamentals by their anticipation horizon. We find that anticipated shocks account for about half of predicted aggregate fluctuations in output, consumption, investment, and employment.

Keywords: Anticipated Shocks, Bayesian Estimation., Sources of Aggregate Fluctuations

JEL Classification: C11, C51, E13, E32

Suggested Citation

Schmitt-Grohe, Stephanie and Uribe, Martin, What's News in Business Cycles (May 2012). CEPR Discussion Paper No. DP8984, Available at SSRN: https://ssrn.com/abstract=2153416

Stephanie Schmitt-Grohe (Contact Author)

Centre for Economic Policy Research (CEPR) ( email )

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National Bureau of Economic Research (NBER)

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Martin Uribe

Columbia University - Graduate School of Arts and Sciences - Department of Economics ( email )

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