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The Informational Role of the Business Cycle

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  • Dellas, Harris

Abstract

Economic decisions such as occupational and entrepreneurial choices may violate true comparative advantage when economic agents are uncertain about which activity best matches their talents. If relative performance varies over the business cycle (for instance, if downturns affect disproportionately those who are pursuing the wrong activity), then economic fluctuations may affect the probability and persistence of resource mismatches. The present work offers a novel, informational perspective to the business cycle and provides a link between aggregate fluctuations and the long-term allocation of resources.

Suggested Citation

  • Dellas, Harris, 2003. "The Informational Role of the Business Cycle," CEPR Discussion Papers 4076, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:4076
    as

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    References listed on IDEAS

    as
    1. Dotsey, Michael & King, Robert G, 1986. "Informational Implications of Interest Rate Rules," American Economic Review, American Economic Association, vol. 76(1), pages 33-42, March.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Business cycles; Incomplete information; Matching; Comparative advantage; Stabilization;
    All these keywords.

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General

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