Take Action

Home | Faculty & Research Overview | Research

Research Details

Can News about the Future Drive the Business Cycle?, American Economic Review

Abstract

We propose a model that generates an economic expansion following good news about future total factor productivity (TFP) or investment-specific technical change. The model has three key elements: variable capital utilization, adjustment costs to investment, and preferences that exhibit a weak short-run wealth effect on the labor supply. These preferences nest,as special cases, the two classes of utility functions most widely used in the business cycle literature. Our model generates recessions that resemble those of the post-war U.S. economy without relying on negative productivity shocks. Recessions are caused not by contemporaneous negative shocks but by lackluster news about future TFP or investment-specific technical change.

Type

Article

Author(s)

Nir Jaimovich, Sergio Rebelo

Date Published

2009

Citations

Jaimovich, Nir, and Sergio Rebelo. 2009. Can News about the Future Drive the Business Cycle?. American Economic Review. 9(4): 1097-1118.

KELLOGG INSIGHT

Explore leading research and ideas

Find articles, podcast episodes, and videos that spark ideas in lifelong learners, and inspire those looking to advance in their careers.
learn more

COURSE CATALOG

Review Courses & Schedules

Access information about specific courses and their schedules by viewing the interactive course scheduler tool.
LEARN MORE

DEGREE PROGRAMS

Discover the path to your goals

Whether you choose our Full-Time, Part-Time or Executive MBA program, you’ll enjoy the same unparalleled education, exceptional faculty and distinctive culture.
learn more

Take Action