business cycles model with exogenous productivity shocks, cannot produce this correlation. We propose an explanation based on …

This paper demonstrates that increased optimism about future productivity can generate an immediate economic expansion …, expectations of higher future productivity raise the demand for new vintages of capital relative to installed capital. Capital …

decentralized banking that produces exchange credit. Positive shocks to credit productivity and money supply increase velocity, as … money demand falls, while a positive goods productivity shock raises temporary output and velocity. The paper explains such … important for velocity during less stable times and the goods productivity shock more important during stable times. …