The spirit of capitalism and expectation-driven business cycles

Journal of Monetary Economics, 2010, vol. 57, issue 6, 739-752

Abstract: While news shocks are believed to be instrumental in explaining business cycles, many existing models fail to predict a boom in consumption, investment, employment, output and asset prices in response to good news about future productivity. A model with the intrinsic desire for wealth is shown to generate the aforementioned responses. A news-driven boom is explained predominantly by an expansion of labor supply and is characterized by the falling real wage. The simulated model not only captures well conventional business cycle statistics, but also reproduces countercyclical real returns and hump-shaped responses of hours and output to an unexpected technology shock.

Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (65)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0304-3932(10)00064-4
Full text for ScienceDirect subscribers only

Related works:
Working Paper: The Spirit of Capitalism and Expectation Driven Business Cycles (2008)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:57:y:2010:i:6:p:739-752

Access Statistics for this article

Journal of Monetary Economics is currently edited by R. G. King and C. I. Plosser

More articles in Journal of Monetary Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().