This paper provides a general equilibrium multi-stage production model to explain the co-existence and co-movement of output- and input-inventories. The model offers a neoclassical perspective on the propagation mechanism of demand uncertainty. It reveals that uncertainty in demand at downstream...

The extremely weak propagation mechanisms of real business cycle (RBC) models are well acknowledged, and some effort has been devoted to improving the models on this dimension. This paper builds on these efforts to provide an explicit explanation of why various existing RBC models do not...

The research led by Gali (AER 1999) and Basu et al. (AER 2006) raises two important questions regarding the validity of the RBC theory: (i) How important are technology shocks in explaining the business cycle? (ii) Do impulse responses to technology shocks found in the data reject the assumption...

A large empirical literature attempts to identify US monetary policy shocks using the effective federal funds rate. This paper compares the time series behavior of the effective federal funds rate to 10 US interest rates with maturities ranging form overnight to 10 years. Using a spectral...