Frictional Coordination
Name
w24178.pdf
Description
Submitted version
Size
484.95 KB
Format
Adobe PDF
Checksum (MD5)
a171be7f7293ae89ee9d9e23265dd878
Author(s)
Angeletos, George-Marios
Date Issued
2018
Journal
Journal of the European Economic Association
Publisher
Oxford University Press (OUP)
Version
Original manuscript
Abstract
The notion that business cycles are driven by fluctuations in aggregate demand is subtle. I first review some of the conceptual and empirical challenges faced when trying to accommodate this notion in micro-founded, general-equilibrium models. I next review my own research, which sheds new light on the observed business cycles by accommodating frictional coordination in the form of higher-order uncertainty. This makes room for forces akin to animal spirits even when the equilibrium is unique. It allows demand shocks to generate realistic business cycles even when nominal rigidity is absent or undone by appropriate monetary policy. It modifies the general-equilibrium predictions of workhorse macroeconomic models in manners that seem both conceptually appealing and empirically relevant. And it offers new guidance to policy.
MIT Department
Massachusetts Institute of Technology. Department of Economics
Terms of Use
Creative Commons Attribution-Noncommercial-Share Alike
Persistent DSpace Link
DOI of Published Version
https://doi.org/10.1093/JEEA/JVY019
