Ascari, Guido
[VerfasserIn]
;
Sims, Eric
[Sonstige Person, Familie und Körperschaft];
Phaneuf, Louis
[Sonstige Person, Familie und Körperschaft]National Bureau of Economic Research
Business Cycles, Investment Shocks, and the "Barro-King" Curse
Erschienen:
Cambridge, Mass: National Bureau of Economic Research, December 2016
Erschienen in:NBER working paper series ; no. w22941
Umfang:
1 Online-Ressource
Sprache:
Englisch
DOI:
10.3386/w22941
Identifikator:
Reproduktionsnotiz:
Hardcopy version available to institutional subscribers
Entstehung:
Anmerkungen:
Mode of access: World Wide Web
System requirements: Adobe [Acrobat] Reader required for PDF files
Beschreibung:
Recent empirical evidence identifies investment shocks as key driving forces behind business cycle fluctuations. However, existing New Keynesian models emphasizing these shocks counterfactually imply a negative unconditional correlation between consumption growth and investment growth, a weak positive unconditional correlation between consumption growth and output growth and anomalous profiles of cross-correlations involving consumption growth. These anomalies arise because of a short-run contractionary effect a positive investment shock on consumption. Such counterfactual co-movements are typical of the "Barro-King curse" (Barro and King 1984), wherein models with a real business cycle core must rely on technology shocks to account for the observed co-movement among output, consumption, investment, and hours. We show that two realistic additions to an otherwise standard medium scale New Keynesian model - namely, roundabout production and real per capita output growth stemming from trend growth in neutral and investment-specific technologies - can break the Barro-King curse and provide a more accurate account of unconditional business cycle comovements more generally. These two features substantially magnify the effects of neutral technology and investment shocks on aggregate fluctuations and generate a rise of consumption on impact of a positive investment shock