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What's News in Business Cycles

Author

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  • Uribe, Martín
  • Schmitt-Grohé, Stephanie

Abstract

In the context of a dynamic, stochastic, general equilibrium model, we perform classical maximum-likelihood and Bayesian estimations of the contribution of anticipated shocks to business cycles in the postwar United States. Our identification approach relies on the fact that forward-looking agents react to anticipated changes in exogenous fundamentals before such changes materialize. It further allows us to distinguish changes in fundamentals by their anticipation horizon. We find that anticipated shocks account for about half of predicted aggregate fluctuations in output, consumption, investment, and employment.

Suggested Citation

  • Uribe, Martín & Schmitt-Grohé, Stephanie, 2012. "What's News in Business Cycles," CEPR Discussion Papers 8984, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:8984
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    More about this item

    Keywords

    Anticipated shocks; Bayesian estimation.; Sources of aggregate fluctuations;
    All these keywords.

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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