This paper incorporates preferences that display first-order risk aversion (FORA) into a standard real business cycle model. Although FORA preferences represent a sharp departure from the expected utility/constant relative risk aversion (EU/CRRA) preferences common in the business cycle...

The U.S. Department of Commerce composite index of leading indicators (CLI) is a widely cited and influential economic series. In this article, Evan F. Koenig and Kenneth M. Emery examine how well movements in the CLI predict business-cycle turning points. Using data that actually would have...

Empirical studies suggest that monetary policy shocks can have a sustained impact on aggregate output. How is it possible for nominal shocks to have persistent real effects? One popular explanation centers on overlapping price contracts. However, recent theoretical work has cast doubt on the...