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Business Cycles

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Enrique G Mendoza – One of the best experts on this subject based on the ideXlab platform.

  • a general equilibrium model of sovereign default and Business Cycles
    Quarterly Journal of Economics, 2012
    Co-Authors: Enrique G Mendoza

    Abstract:

    Emerging markets Business cycle models treat default risk as part of an exogenous interest rate on working capital, while sovereign default models treat income fluctuations as an exogenous endowment process with ad-noc default costs. We propose instead a general equilibrium model of both sovereign default and Business Cycles. In the model, some imported inputs require working capital financing; default on public and private obligations occurs simultaneously. The model explains several features of cyclical dynamics around default triggers an efficiency loss as these inputs are replaced by imperfect substitutes; and default on public and private obligations occurs simultaneously. The model explains several features of cyclical dynamics around deraults, countercyclical spreads, high debt ratios, and key Business cycle moments.

  • a general equilibrium model of sovereign default and Business Cycles
    National Bureau of Economic Research, 2011
    Co-Authors: Enrique G Mendoza

    Abstract:

    Emerging markets Business cycle models treat default risk as part of an exogenous interest rate on working capital, while sovereign default models treat income fluctuations as an exogenous endowment process with ad-hoc default costs. We propose instead a general equilibrium model of both sovereign default and Business Cycles. In the model, some imported inputs require working capital financing; default triggers an efficiency loss as these inputs are replaced by imperfect substitutes; and default on public and private obligations occurs simultaneously. The model explains several features of cyclical dynamics around defaults, countercyclical spreads, high debt ratios, and key Business cycle moments.

David K Backus – One of the best experts on this subject based on the ideXlab platform.

  • international Business Cycles theory and evidence
    National Bureau of Economic Research, 1993
    Co-Authors: David K Backus, Patrick J Kehoe, Finn E Kydland

    Abstract:

    We review recent work comparing properties of international Business Cycles with those of dynamic general equilibrium models, emphasizing two discrepancies between theory and data that we refer to as anomalies. The first is the consumption/output/productivity anomaly: in the data we generally find that the correlation across countries of output fluctuations is larger than the analogous consumption and productivity correlations. In theoretical economies we find, for a wide range of parameter values, that the consumption correlation exceeds the productivity and output correlations. The second anomaly concerns relative price movements: the standard deviation of the terms of trade is considerably larger in the data than it is in theoretical economies. We speculate on changes in theoretical structure that might bring theory and data closer together.

  • international real Business Cycles
    Journal of Political Economy, 1992
    Co-Authors: David K Backus, Patrick J Kehoe, Finn E Kydland

    Abstract:

    We ask whether a two-country real Business cycle model can account simultaneously for domestic and international aspects of Business Cycles. With this question in mind, we document a number of discrepancies between theory and data. The most striking discrepancy concerns the correlations of consumption and output across countries. In the data, outputs are generally more highly correlated across countries than consumptions. In the model we see the opposite.

  • international evidence on the historical properties of Business Cycles
    The American Economic Review, 1992
    Co-Authors: David K Backus, Patrick J Kehoe

    Abstract:

    We document properties of Business Cycles in ten countries over the last hundred years, contrasting the behavior of real quantities with that of the price level and the stock of money. Although the magnitude of output fluctuations has varied across countries and periods, relations among variables have been remarkably uniform. Consumption has generally been about as variable as output, and investment substantially more variable, and both have been strongly procyclical. The trade balance has generally been countercyclical. The exception to this regularity is government purchases, which exhibit no systematic cyclical tendency. With respect to the size of output fluctuations, standard deviations are largest between the two world wars. In some countries (notably Australia and Canada) they are substantially larger prior to World War I than after World War II, but in others (notably Japan and the United Kingdom) there is little difference between these periods. Properties of price levels, in contrast, exhibit striking differences between periods. Inflation rates are more persistent after World War II than before, and price level fluctuations are typically procyclical before World War II, countercyclical afterward. We find no general tendency toward increased persistence in money growth rates, but find that fluctuations in money are less highly correlated with output in the postwar period.

Martín Uribe – One of the best experts on this subject based on the ideXlab platform.

  • what s news in Business Cycles
    Econometrica, 2012
    Co-Authors: Stephanie Schmittgrohe, Martín Uribe

    Abstract:

    In this paper, we perform a structural Bayesian estimation of the contribution of anticipated shocks to Business Cycles in the postwar United States. Our theoretical framework is a real-Business-cycle model augmented with four real rigidities: investment adjustment costs, variable capacity utilization, habit formation in consumption, and habit formation in leisure. Business Cycles are assumed to be driven by permanent and stationary neutral productivity shocks, permanent investment-specific shocks, and government spending shocks. Each of these shocks is buffeted by four types of structural innovations: unanticipated innovations and innovations anticipated one, two, and three quarters in advance. We find that anticipated shocks account for more than two thirds of predicted aggregate fluctuations. This result is robust to estimating a variant of the model featuring a parametric wealth elasticity of labor supply. (This abstract was borrowed from another version of this item.)

  • Real Business Cycles in Emerging Countries?
    American Economic Review, 2010
    Co-Authors: By Javier García-cicco, Roberto Pancrazi, Martín Uribe

    Abstract:

    We use more than a century of Argentine and Mexican data to estimate the structural parameters of a small-open-economy real-Business-cycle model driven by nonstationary productivity shocks. We find that the RBC model does a poor job of explaining Business Cycles in emerging countries. We then estimate an augmented model that incorporates shocks to the country premium and financial frictions. We find that the estimated financial-friction model provides a remarkably good account of Business Cycles in emerging markets and, importantly, assigns a negligible role to nonstationary productivity shocks. (JEL E13, E32, E44, F43, O11, O16)

  • what s news in Business Cycles
    National Bureau of Economic Research, 2008
    Co-Authors: Stephanie Schmittgrohe, Martín Uribe

    Abstract:

    In this paper, we perform a structural Bayesian estimation of the contribution of anticipated shocks to Business Cycles in the postwar United States. Our theoretical framework is a real-Business-cycle model augmented with four real rigidities: investment adjustment costs, variable capacity utilization, habit formation in consumption, and habit formation in leisure. Business Cycles are assumed to be driven by permanent and stationary neutral productivity shocks, permanent investment-specific shocks, and government spending shocks. Each of these driving forces is buffeted by four types of structural innovations: unanticipated innovations and innovations anticipated one, two, and three quarters in advance. We find that anticipated shocks account for more than two thirds of predicted aggregate fluctuations.