A Theory of Demand Shocks
This paper presents a model of business cycles driven by shocks to consumer expectations regarding aggregate productivity. Agents are hit by heterogeneous productivity shocks, they observe their own productivity and a noisy public signal regarding aggregate productivity. The public signal gives rise...
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| Other Authors: | |
| Format: | Article |
| Language: | en_US |
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American Economic Association
2010
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| Online Access: | http://hdl.handle.net/1721.1/51815 |
| _version_ | 1826197667144794112 |
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| author | Lorenzoni, Guido |
| author2 | Massachusetts Institute of Technology. Department of Economics |
| author_facet | Massachusetts Institute of Technology. Department of Economics Lorenzoni, Guido |
| author_sort | Lorenzoni, Guido |
| collection | MIT |
| description | This paper presents a model of business cycles driven by shocks to consumer expectations regarding aggregate productivity. Agents are hit by heterogeneous productivity shocks, they observe their own productivity and a noisy public signal regarding aggregate productivity. The public signal gives rise to "noise shocks," which have the features of aggregate demand shocks: they increase output, employment, and inflation in the short run and have no effects in the long run. Numerical examples suggest that the model can generate sizable amounts of noise-driven volatility. |
| first_indexed | 2024-09-23T10:51:37Z |
| format | Article |
| id | mit-1721.1/51815 |
| institution | Massachusetts Institute of Technology |
| language | en_US |
| last_indexed | 2024-09-23T10:51:37Z |
| publishDate | 2010 |
| publisher | American Economic Association |
| record_format | dspace |
| spelling | mit-1721.1/518152022-09-30T23:30:30Z A Theory of Demand Shocks Lorenzoni, Guido Massachusetts Institute of Technology. Department of Economics Lorenzoni, Guido Lorenzoni, Guido This paper presents a model of business cycles driven by shocks to consumer expectations regarding aggregate productivity. Agents are hit by heterogeneous productivity shocks, they observe their own productivity and a noisy public signal regarding aggregate productivity. The public signal gives rise to "noise shocks," which have the features of aggregate demand shocks: they increase output, employment, and inflation in the short run and have no effects in the long run. Numerical examples suggest that the model can generate sizable amounts of noise-driven volatility. 2010-02-24T18:28:51Z 2010-02-24T18:28:51Z 2009-12 2008-11 Article http://purl.org/eprint/type/SubmittedJournalArticle 0002-8282 http://hdl.handle.net/1721.1/51815 Lorenzoni, Guido 2009. "A Theory of Demand Shocks." American Economic Review, 99(5): 2050–84. en_US http://dx.doi.org/10.1257/aer.99.5.2050 American Economic Review Article is made available in accordance with the publisher's policy and may be subject to US copyright law. Please refer to the publisher's site for terms of use. application/pdf American Economic Association author/dept web page |
| spellingShingle | Lorenzoni, Guido A Theory of Demand Shocks |
| title | A Theory of Demand Shocks |
| title_full | A Theory of Demand Shocks |
| title_fullStr | A Theory of Demand Shocks |
| title_full_unstemmed | A Theory of Demand Shocks |
| title_short | A Theory of Demand Shocks |
| title_sort | theory of demand shocks |
| url | http://hdl.handle.net/1721.1/51815 |
| work_keys_str_mv | AT lorenzoniguido atheoryofdemandshocks AT lorenzoniguido theoryofdemandshocks |