We explore the ability of a model with knowledge capital to generate expectationsdriven business cycles. Knowledge capital is an input into production which is endogenously produced through a learning-by-doing process. We show that a standard real business cycle model augmented with only a learningby-doing technology can exhibit an expectations-driven business cycle in response to news about a future change in total factor productivity. News about future productivity increases immediately raises the value of knowledge. This induces agents to accumulate knowledge now by working harder. The ensuing expansion of output is sufficient that both current consumption and investment can increase above steady state levels despite the absence of any contemporaneous productivity shock. Moreover, if knowledge capital is accumulated by firms the boom in real variables is accompanied by an appreciation in the price of equity shares, a feature that has empirical support.

The boom-years preceding the "Great Recession" were a time of rapid innovation in the financial industry. We explore the idea that both the boom and eventual bust emerged from overoptimistic expectations of efficiency-gains in the financial sector. We treat the bankruptcy costs facing intermediaries in a costly state verification problem as a stochastic process, and model the boom-bust in terms of an unfulfilled news-shock where the expected fall in costs are eventually not realized. In response to a change in expectations only, the model generates a boom-bust cycle in aggregate activity, asset prices and leverage, and a countercyclical credit spread.

This chapter examines the evidence for pre-Mamom pottery in the northern Maya lowlands. This pottery, recognized as the Ek complex, has been identified at Komchen and Kiuic as well as several other sites in the western part of northern Yucatan. The identification, description, and comparison of this pottery with contemporary complexes from the southern Maya lowlands establishes Ek pottery as the oldest ceramic complex (900-800 B.C.) recovered in the north. Northern Maya culture is thought to be the result of a process of in situ evolution which begins at roughly the same time it happened in the south.

In a model where banks face a capital sufficiency requirement, we demonstrate that news about a fall in the expected return on a portfolio of international long bonds held by a bank leads to an immediate and persistent fall in economic activity. Even if the news never materializes, economic activity falls below steady state for several periods, followed by a recovery. The portfolio adjustment induced by the capital sufficiency requirements leads to a rise in loan rates and tighter credit conditions, which trigger the fall in activity. We contribute to the news-shock literature by showing that imperfect signals about future financial returns can create business cycles without relying on the usual suspects—shocks to technology, preferences, or fiscal policy—and to the emerging economy business cycle literature in that disturbances in world financial markets can cause domestic business cycles without shocks to the world interest rate or to country spreads.

We pursue an empirical strategy to identify a monetary news shock in the U.S. economy. We use a monetary policy residual, along with other variables in a vector autoregression (VAR), and identify a monetary news shock as the linear combination of reduced‐form innovations that is orthogonal to the current residual and that maximizes the sum of contributions to its forecast error variance over a finite horizon. Real GDP declines in a persistent manner after a positive monetary news shock. This contraction in economic activity is accompanied by a fall in inflation and a rapid increase in the nominal interest rate.