Ambiguous Business Cycles∗

Abstract

This paper considers business cycle models with agents who dislike both risk and ambiguity (Knightian uncertainty). Ambiguity aversion is described by recursive multiple priors preferences that capture agents’ lack of confidence in probability assessments. While modeling changes in risk typically requires higher-order approximations, changes in ambiguity in… (More)
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@inproceedings{Ilut2011AmbiguousBC, title={Ambiguous Business Cycles∗}, author={Cosmin Ilut and Martin W Schneider}, year={2011} }