News about Aggregate Demand and the Business Cycle

  title={News about Aggregate Demand and the Business Cycle},
  author={Jang-Ting Guo},
We show that an otherwise standard one-sector real business cycle model with variable capital utilization and mild increasing returns-to-scale is able to generate qualitatively as well as quantitatively realistic aggregate fluctuations driven by news shocks to two formulations of future consumption demand or government spending on goods and services. In sharp contrast to many studies in the existing expectations-driven business cycle literature, this result does not rely on non-separable… CONTINUE READING

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