Université de Lausanne
Ecole des HEC
Département d'économétrie et d'économie politique

Wednesday March 25, 2009, 13:00
Extranef, Dorigny, room 126

Stéphanie SCHMITT-GROHE

(Columbia University, New York, USA)

What's News in Business Cycles

Abstract
In this paper, we perform a structural Bayesian estimation of the contribution of anticipated shocks to business cycles in the postwar United States. Our theoretical framework is a real-business-cycle model augmented with four real rigidities: investment adjustment costs, variable capacity utilization, habit formation in consumption, and habit formation in leisure. Business cycles are assumed to be driven by permanent and stationary neutral productivity shocks, permanent investment-specific shocks, and government spending shocks. Each of these shocks is buffeted by four types of structural innovations: unanticipated innovations and innovations anticipated one, two, and three quarters in advance. We find that anticipated shocks account for more than two thirds of predicted aggregate fluctuations. This result is robust to estimating a variant of the model featuring a parametric wealth elasticity of labor supply.

Web site of the seminar (with paper online): http://www.hec.unil.ch/deep/evenements-english/e-sem-all-2008-09.htm