Risk and Ambiguity in Models of Business Cycles

48 Pages Posted: 24 Jul 2014

See all articles by David K. Backus

David K. Backus

NYU Stern School of Business; National Bureau of Economic Research (NBER)

Axelle Ferriere

European University Institute

Stanley E. Zin

New York University (NYU); National Bureau of Economic Research (NBER)

Date Written: July 2014

Abstract

We inject aggregate uncertainty - risk and ambiguity - into an otherwise standard business cycle model and describe its consequences. We find that increases in uncertainty generally reduce consumption, but they do not account, in this model, for either the magnitude or the persistence of the most recent recession. We speculate about extensions that might do better along one or both dimensions.

Suggested Citation

Backus, David K. and Ferriere, Axelle and Zin, Stanley E., Risk and Ambiguity in Models of Business Cycles (July 2014). NBER Working Paper No. w20319. Available at SSRN: https://ssrn.com/abstract=2471212

David K. Backus (Contact Author)

NYU Stern School of Business

44 West Fourth Street
New York, NY 10012
United States
212-998-0873 (Phone)
212-995-4220 (Fax)

HOME PAGE: http://pages.stern.nyu.edu/~dbackus/

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

HOME PAGE: http://pages.stern.nyu.edu/~dbackus/

Axelle Ferriere

European University Institute ( email )

Via delle Fontanelle 18
Villa La Fonte
Fiesole, 50014
Italy

Stanley E. Zin

New York University (NYU) ( email )

Bobst Library, E-resource Acquisitions
20 Cooper Square 3rd Floor
New York, NY 10003-711
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
10
Abstract Views
312
PlumX Metrics