Working Paper
Demand shocks and economic fluctuations
Abstract: This paper studies conditions under which demand-side shocks can generate realistic business cycles in RBC models. Although highly persistent demand shocks are necessary for generating procyclical investment, variable capacity utilization and habit formation can reduce the required degree of persistence.
https://doi.org/10.20955/wp.2006.011
Status: Published in Economics Letters, March 2006, 90(3), pp. 373-83
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Provider: Federal Reserve Bank of St. Louis
Part of Series: Working Papers
Publication Date: 2006
Number: 2006-011