Homework in Macroeconomics: Household Production and Aggregate Fluctuations

Benhabib, Jess; Rogerson, Richard; Wright, Randall

doi:10.21034/sr.135

Cited by 226 publications

(381 citation statements)

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“…Various models were found to be inconsistent with this observation. In the home production literature (Benhabib et al, 1991;Greenwood and Hercowitz, 1991;McGrattan et al, 1997), the two types of investment have the opposite lead-lag dynamics of those in the data. Including investment-specific shocks (Gomme and Rupert, 2007) or sectoral productivity shocks in a multisector economy with input-output linkages (Davis and Heathcote, 2005) does not help resolve this issue.…”

Section: Introductionmentioning

confidence: 79%

Housing Dynamics over the Business Cycle

Kydland

Rupert

Šustek

2012

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Housing construction, measured by housing starts, leads GDP in a number of countries. Measured as residential investment, the lead is observed only in the United States and Canada; elsewhere, residential investment is coincident. Variants of existing theory, however, predict housing construction lagging GDP. In all countries in the sample, nominal interest rates are low ahead of GDP peaks. Introducing long-term nominal mortgages, and an estimated process for nominal interest rates, into a standard model aligns the theory with observations on starts, as mortgages transmit nominal rates into real housing costs. Longer time to build makes residential investment cyclically coincident. * Manuscript

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Section: Introductionmentioning

confidence: 79%

Housing Dynamics over the Business Cycle

Kydland

Rupert

Šustek

2012

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“…Given the high assumed Frisch elasticity of labor supply, the model also generates a realistic volatility of hours relative to output. See Rogerson (1988), Hansen (1985), or Benhabib, Rogerson, and Wright (1991) for a discussion of underlying mechanisms that can generate more elastic labor supply in this class of models. Overall, we conclude that the business cycle implications of our model are consistent with the common findings in the literature.…”

Section: Business Cycle Statisticsmentioning

confidence: 99%

Really Uncertain Business Cycles

Bloom¹,

Floetotto

Jaimovich³

et al. 2018

Econometrica

774

215

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We investigate the role of uncertainty in business cycles. First, we demonstrate that microeconomic uncertainty rises sharply during recessions, including during the Great Recession of 2007–2009. Second, we show that uncertainty shocks can generate drops in gross domestic product of around 2.5% in a dynamic stochastic general equilibrium model with heterogeneous firms. However, we also find that uncertainty shocks need to be supplemented by first‐moment shocks to fit consumption over the cycle. So our data and simulations suggest recessions are best modelled as being driven by shocks with a negative first moment and a positive second moment. Finally, we show that increased uncertainty can make first‐moment policies, like wage subsidies, temporarily less effective because firms become more cautious in responding to price changes.

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“…The dynamic relationship between total hours worked and productivity features prominently in a large body of business cycle research (e.g., Benhabib, Rogerson, and Wright (1991), Christiano and Eichenbaum (1992), Galí (1999) for early contributions). Panels (a) and (b) in Figure 6 show two sets of cross-correlations.…”

Section: Labor Inputs Negatively Lead Labor Productivitymentioning

confidence: 99%

The Shifts in Lead‐lag Properties of the U.S. Business Cycle

Brault

Khan

2019

Economic Inquiry

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We document shifts in the lead‐lag properties of the U.S. business cycle since the mid‐1980s. Specifically, (1) the well‐known inverted leading indicator property of real interest rates has completely vanished; (2) labor productivity switched from positively leading to negatively lagging output and labor inputs over the cycle; and (3) the unemployment rate shifted from lagging productivity negatively to leading positively. Many contemporary business cycle models produce counterfactual cross‐correlations revealing that popular frictions and shocks provide an incomplete account of business cycle comovement. Determining the underlying sources of these shifts in the lead‐lag properties and their consequences for macroeconomic forecasts is therefore a promising direction for future research. (JEL E24, E32, E43)

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Homework in Macroeconomics: Household Production and Aggregate Fluctuations

Cited by 226 publications

References 0 publications

Housing Dynamics over the Business Cycle

Housing Dynamics over the Business Cycle

Really Uncertain Business Cycles

The Shifts in Lead‐lag Properties of the U.S. Business Cycle

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