News and Business Cycles in Open Economies / Nir Jaimovich, Sergio Rebelo.

Format:

Book

Author/Creator:

Jaimovich, Nir.

Contributor:

National Bureau of Economic Research.

Rebelo, Sergio.

Series:

Working Paper Series (National Bureau of Economic Research) no. w13444.

NBER working paper series no. w13444

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2007.

Summary:

Aggregate and sectoral comovement are central features of business cycle data. Therefore, the ability to generate comovement is a natural litmus test for macroeconomic models. But it is a test that most existing models fail. In this paper we propose a unified model that generates both aggregate and sectoral comovement in response to contemporaneous shocks and news shocks about fundamentals. The fundamentals that we consider are aggregate and sectoral TFP shocks as well as investment-specific technical change. The model has three key elements: variable capital utilization, adjustment costs to investment, and a new form of preferences that allow us to parameterize the strength of short-run wealth effects on the labor supply.

Notes:

Print version record

September 2007.