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Understanding Expectation‐Driven Fluctuations: A Labor‐Market Approach
Author(s) -
WANG PENGFEI
Publication year - 2012
Publication title -
journal of money, credit and banking
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.763
H-Index - 108
eISSN - 1538-4616
pISSN - 0022-2879
DOI - 10.1111/j.1538-4616.2012.00497.x
Subject(s) - aggregate (composite) , business cycle , economics , simple (philosophy) , econometrics , market structure , computer science , microeconomics , keynesian economics , philosophy , materials science , epistemology , composite material
This paper presents a unified analysis of neoclassical models that can generate expectation‐driven business cycles under anticipated future technology shocks (or news shocks). It shows that the ability or inability of various RBC models to generate positive comovement of aggregate variables hinges crucially on the structure of the labor market equilibrium. The analysis provides a simple and intuitive guide to understanding the existing literature and to searching for new models that can explain the data under news shocks.