This paper suggests that non-fundamental component in asset prices is one of the drivers of financial and credit cycle. Presented model builds on the financial accelerator literature by including a stock market where limitedly-liable investors trade stocks of productive firms with stochastic...

The welfare cost of random consumption fluctuations is known from De Santis (2007) to be increasing in the level of uninsured idiosyncratic consumption risk. It is known from Barillas, Hansen, and Sargent (2009) to increase if agents care about robustness to model misspecification. We calculate...

In response to income fluctuations, households smooth consumption by substituting between market expenditure and time inputs. This paper provides evidence of this substitution in the context of food consumption over transitory and permanent income fluctuations in Mexico. Household time...

Within a search and matching model with risk-averse workers, endogenous hiring and separation, and unobservable search effort, we show how to decentralize the constrained-efficient allocation by a combination of a production tax and three labor-market policy instruments: vacancy subsidies,...

We investigate the information content of business tendency surveys for key macroeconomic variables in Switzerland. To summarise the information of a large data set of sectoral business tendency surveys we extract a small number of common factors by a principal components estimator. The...

Business fluctuations are associated with business cycles but are not implying the regularity. We consider that the lobbying activities can influence the periods of economic recession and expansion from business fluctuations. The role of lobbying is to affect the decisions made by officials in...

In U.S. data 1981–2012, unsecured firm credit moves procyclically and tends to lead GDP, while secured firm credit is acyclical; similarly, shocks to unsecured firm credit explain a far larger fraction of output fluctuations than shocks to secured credit. In this paper we develop a tractable...

We examine the theoretical interrelations between progressive income taxation and macroeconomic (in)stability in an otherwise standard one-sector real business cycle model with utility-generating government purchases of goods and services. When private and public consumption expenditures are...

It has been alleged that J M Keynes, quoting in the General Theory a passage from J S Mill’s Principles, misunderstood the passage in question and was therefore wrong to cite Mill as an upholder of the ‘classical’ proposition that ‘supply creates its own demand’....

Private sector employment rose by over a million in the past three years. Commentators often interpret this number – which is a net figure – as ‘job creation’. But how many jobs really are created each year, and conversely how many are lost? How has this changed with...