dc.contributor.author | Angeletos, George-Marios | |
dc.contributor.author | Lian, Chen | |
dc.date.accessioned | 2022-08-25T17:20:07Z | |
dc.date.available | 2022-08-25T17:20:07Z | |
dc.date.issued | 2022 | |
dc.identifier.uri | https://hdl.handle.net/1721.1/144443 | |
dc.description.abstract | <jats:title>Abstract</jats:title>
<jats:p>We revisit the question of why shifts in aggregate demand drive business cycles. Our theory combines intertemporal substitution in production with rational confusion, or bounded rationality, in consumption and investment. The first element allows aggregate supply to respond to shifts in aggregate demand without nominal rigidity. The second introduces a “confidence multiplier,” that is, a positive feedback loop between real economic activity, consumer expectations of permanent income, and investor expectations of returns. This mechanism amplifies the business-cycle fluctuations triggered by demand shocks (but not necessarily those triggered by supply shocks); it helps investment to comove with consumption; and it allows front-loaded fiscal stimuli to crowd in private spending.</jats:p> | en_US |
dc.language.iso | en | |
dc.publisher | Oxford University Press (OUP) | en_US |
dc.relation.isversionof | 10.1093/RESTUD/RDAB064 | en_US |
dc.rights | Creative Commons Attribution-Noncommercial-Share Alike | en_US |
dc.rights.uri | http://creativecommons.org/licenses/by-nc-sa/4.0/ | en_US |
dc.source | NBER | en_US |
dc.title | Confidence and the Propagation of Demand Shocks | en_US |
dc.type | Article | en_US |
dc.identifier.citation | Angeletos, George-Marios and Lian, Chen. 2022. "Confidence and the Propagation of Demand Shocks." Review of Economic Studies, 89 (3). | |
dc.contributor.department | Massachusetts Institute of Technology. Department of Economics | |
dc.relation.journal | Review of Economic Studies | en_US |
dc.eprint.version | Author's final manuscript | en_US |
dc.type.uri | http://purl.org/eprint/type/JournalArticle | en_US |
eprint.status | http://purl.org/eprint/status/PeerReviewed | en_US |
dc.date.updated | 2022-08-25T16:31:37Z | |
dspace.orderedauthors | Angeletos, G-M; Lian, C | en_US |
dspace.date.submission | 2022-08-25T16:31:38Z | |
mit.journal.volume | 89 | en_US |
mit.journal.issue | 3 | en_US |
mit.license | OPEN_ACCESS_POLICY | |
mit.metadata.status | Authority Work and Publication Information Needed | en_US |