Document Type

Working Paper

Publication Date

9-20-2012

College/Unit

Chambers College of Business and Economics

Document Number

12-02

Department/Program/Center

Economics

Abstract

We show that an otherwise standard one-sector real business cycle model with variable capital utilization and mild increasing returns-to-scale is able to generate qualitatively as well as quantitatively realistic aggregate fluctuations driven by news shocks to future consumption demand. In sharp contrast to many studies in the existing expectations- driven business cycle literature, our results do not rely on non-separable preferences or investment adjustment costs.

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Economics Commons

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