Role of Expectations in Economic Fluctuations and Implications for Trade Balance
2
조회
0
다운로드
0
인용
0
참고문헌
키워드
초록
This paper examines how expectations about the future events plays a role as a driving force behind business cycle. There are two exogenous shocks in the economy, i.e., technology shock and government expenditure shock. The idea is that news about a shock in the foreseeable future can induce different reactions from the economic agents even without an actual realization of such event by affecting their expectation-forming behavior. The paper first builds a simple economy and finds a steady state equilibrium by solving the system of simultaneous equations. After introducing the news shocks to the economy, the paper explicitly writes down the policy function for key economic variables in order to examine their responses to the news shock. Finally, a simulation is conducted regarding the news-driven business cycles. The study results show that expectation-driven shocks can actually induce a positive comovement among the consumption, investment, employment, and output. It is also shown that the shocks generate trade balance fluctuations in the opposite direction of the output level.
Abstract
This paper examines how expectations about the future events plays a role as a driving force behind business cycle. There are two exogenous shocks in the economy, i.e., technology shock and government expenditure shock. The idea is that news about a shock in the foreseeable future can induce different reactions from the economic agents even without an actual realization of such event by affecting their expectation-forming behavior. The paper first builds a simple economy and finds a steady state equilibrium by solving the system of simultaneous equations. After introducing the news shocks to the economy, the paper explicitly writes down the policy function for key economic variables in order to examine their responses to the news shock. Finally, a simulation is conducted regarding the news-driven business cycles. The study results show that expectation-driven shocks can actually induce a positive comovement among the consumption, investment, employment, and output. It is also shown that the shocks generate trade balance fluctuations in the opposite direction of the output level.
참고문헌 (19)
- Backus, "Dynamics of the Trade Balance and the Terms of Trade: The J-Curve?", American Economic Review, 84, pp.84~103 (1994)
- Beaudry, P., "An Exploration into Pigou‘s Theory of Cycles", Journal of Monetary Economics, 51, pp.1183~1216 (2004)
- Beaudry, P., "When Can Changes in Expectations Cause Business Cycle Fluctuations in Neo-Classical Settings?", Journal of Economic Theory, 135(1), pp.458~477 (2007)
- Beveridge, W., "Unemployment: A Problem of Industry", ~ (1909)
- Clark, J. M., "Strategic Factors in Business Cycles" (1934), Augustus M. Kelley Publications
- Christiano, L. J., "Liquidity Effects and the Monetary Transmission Mechanism", American Economic Review, 82(2), pp.346~353 (1992)
- Christiano, L. J., "Bubbles, Financial Shocks, and Monetary Policy, mimeo", ~ (2005)
- Can News Be a Major Source of Aggregate Fluctuations? A Bayesian DSGE Approach, "Fujiwara, I.", Institute for Monetary and Economic Studies, ~, pp.IMES Discussion Paper Series 08-E-16 (2008)
- Glick, "Global versus Country-Specific Productivity Shocks and the Current Account", Journal of Monetary Economics, 35, pp.159~192 (1995)
- Hamilton, J. D., "A New Approach th the Economic Analysis of Nonstationary Time Series and the Business Cycle", Econometrica, 10, pp.143~156 (1989)
- Can News about the Future Drive the Business Cycle?, "Jaimovich, N.", National Bureau of Economic Research, ~, pp.NBER Working Papers 12537 (2006)
- Keynes, J. M., "The General Theory of Employment, Interest and Money" (1936), C.W. Macmillan
- King, R.G., "Resuscitating Real Business Cycles. in: Handbook of Macroeconomics, volume1B", pp.928~1002 (1999)
- Kobayashi K, "Collateralized capital and news-driven cycles", Economics Bulletin, 5(18), pp.1~9 (2007)
- Krolzig, H.M., "Markov-Switching Procedures for Dating the Euro-zone Business Cycles", Vierteljahrshefte zur Wirtschaftsforschung, 70, pp.339~351 (2001)
- McCallum, B.T., "Real Business Cycles Models. in: Modern Business Cycles Theory" (1989), Basil Blackwell
- Pigou, C., "Industrial Fluctuations" (1927), Macmillan
- Uhlig, H, "A Toolkit for Analyzing Nonlinear Dynamic Stochastic Models Easily. in: Computational Methods for the Study of Dynamic Economies", pp.30~61 (1999), Oxford University Press
- Yie, Myung-Soo, "The Cost Channel Effect of Monetary Policy in Korea", Quarterly Bulletin, 14(3) (2008)