Econometrica Vol. 80 No. 6 2012

What's News in Business Cycles

Stephanie Schmitt-Grohé^1,2,3; Martín Uribe^2,4,5,6

¹ Center for Economic and Policy Research · ² National Bureau of Economic Research · ³ Centre for Economic Policy Research · ⁴ Cornell University · ⁵ Columbia University · ⁶ The University of Texas at Austin

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.

DOI

10.3982/ecta8050

Volume

80

Issue

6

Pages

2733-2764

Language

en

Sources

bibtex:phds-export.bib crossref openalex

Cite

APA 7 MLA 9 Chicago (author–date) Harvard Elsevier Harvard (JFE, JBF…) The Accounting Review Academy of Management American Marketing Association INFORMS (Management Science) Copy citation Copied ✓