I study the role of shocks to beliefs combined with Bayesian learning in a standard equilibrium business cycle framework. By adapting ideas from Cogley and Sargent (2008b) to the general equilibrium setting, I am able to study how a prior belief arising from the Great Depression may have...

Evidences from structural VAR show that new business formation positively co-moves with output under news shocks. The Jaimovich-Rebelo model augmented with firm dynamics can explain the empirical findings. The key assumption is endogenous survival rates for new entrants

I consider a real-business cycle, DSGE model where consumption is a function of the present discounted value of wage and capital income. The agent is uncertain if these income variables are stationary or non-stationary and puts positive probability on both representations. The agent uses...

Recent evidence suggests that agents' expectations may have played a role in several cyclical episodes such as the U.S. "new economy" boom in the late 1990s and the real estate boom in Japan in the 1980s. These business cycles feature long and gradual boom and sharp bust phases. Existing...