Relative-Preference Shifts and the Business Cycle

@article{Addessi2010RelativePreferenceSA,
  title={Relative-Preference Shifts and the Business Cycle},
  author={William Addessi and Francesco Busato},
  journal={The B.E. Journal of Macroeconomics},
  year={2010},
  volume={10}
}
This paper develops a two-sector dynamic general equilibrium model in which intertemporal fluctuations (and sectoral co-movement) are driven by idiosyncratic shocks to relative preferences among consumption goods. This class of shocks may be interpreted as shifts in consumer tastes. When shifts in preferences occur, consumers associate a new and different level of satisfaction to the same basket of consumption goods according to their modified preferences. This paper shows that if the initial… CONTINUE READING

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