Guo, Jang-Ting and Sirbu, Anca-Ioana and Suen, Richard M. H. (2010): On Expectations-Driven Business Cycles in Economies with Production Externalities: A Comment.
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Eusepi (2009, International Journal of Economic Theory 5, pp. 9-23) analytically finds that a one-sector real business cycle model may exhibit positive co-movement between consumption and investment when the equilibrium wage-hours locus is positively-sloped and steeper than the household's labor supply curve. However, we show that this condition does not imply expectations-driven business cycles will emerge in Eusepi's model. Specifically, a positive news shock about future productivity improvement leads to an aggregate recession whereby output, employment, consumption and investment all fall in the announcement period.
|Item Type:||MPRA Paper|
|Original Title:||On Expectations-Driven Business Cycles in Economies with Production Externalities: A Comment|
|Keywords:||Expectations-Driven Business Cycles; Production Externalities.|
|Subjects:||E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E32 - Business Fluctuations; Cycles
C - Mathematical and Quantitative Methods > C6 - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling > C62 - Existence and Stability Conditions of Equilibrium
|Depositing User:||Richard M. H. Suen|
|Date Deposited:||15. Sep 2010 01:25|
|Last Modified:||12. Feb 2013 19:56|
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