“…By incorporating information flows and risk of rare events, this paper provides an alternative interpretation of time-varying uncertainty that is consistent with countercyclical forecast errors and more economically plausible. Finally, this paper also relates to the literature on business cycle fluctuations, including news shocks and co-movement (Beaudry and Portier, 2004;Comin et al, 2009), stochastic volatility (Justiniano and Primiceri, 2008), and asymmetric business cycles (Acemoglu and Scott, 1997;Van Nieuwerburgh and Veldkamp, 2006). While these papers explain one feature of business cycles, they are silent on the question of whether the success comes at a cost of missing other business cycle moments.…”