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Aggregate Shocks or Aggregate Information? Costly Information and Business Cycle Comovement / Laura Veldkamp, Justin Wolfers.
- Format:
- Book
- Author/Creator:
- Veldkamp, Laura.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w12557.
- NBER working paper series no. w12557
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2006.
- Summary:
- Synchronized expansions and contractions across sectors define business cycles. Yet synchronization is puzzling because productivity across sectors exhibits weak correlation. While previous work examined production complementarity, our analysis explores complementarity in information acquisition. Because information about future productivity has a high fixed cost of production and a low marginal cost of replication, sectors can share the cost to forecast their sector-specific productivity. Sectors with common, aggregate information make highly correlated productions choices. By filtering out sector-specific shocks and transmitting aggregate ones, information markets amplify business-cycle comovement.
- Notes:
- Print version record
- October 2006.
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