WHAT'S NEWS IN BUSINESS CYCLES

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 r...

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Bibliographic Details
Published in:Econometrica 2012-11, Vol.80 (6), p.2733-2764
Main Authors: Schmitt-Grohé, Stephanie, Uribe, Martín
Format: Article
Language:English
Subjects:
Anticipated shocks
Applications
Applied general equilibrium models
Bayesian analysis
Bayesian estimation
Bayesian method
Business cycles
Business innovation
Econometrics
Economic fluctuations
Economic models
Economic theory
Exact sciences and technology
Government spending
Insurance, economics, finance
Mathematical analysis
Mathematics
Maximum likelihood estimation
Parametric inference
Partial differential equations
Probability
Probability and statistics
Productivity
Sciences and techniques of general use
sources of aggregate fluctuations
Standard deviation
Statistical variance
Statistics
Steady state economies
Stochastic models
Studies
U.S.A
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Summary: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.
ISSN:0012-9682
1468-0262
DOI:10.3982/ECTA8050