In this work we study the granular origins of business cycles and their possible underlying drivers. As shown by Gabaix (2011), the skewed nature of firm size distributions implies that idiosyncratic (and independent) firm-level shocks may account for a significant portion of aggregate...

We explore empirically models of aggregate fluctuations with two basic ingredients: agents form anticipations about the future based on noisy sources of information and these anticipations affect spending and output in the short run. Our objective is to separate fluctuations due to actual...

The authors provide empirical evidence on the dynamic effects of tax liability changes in the United States. We distinguish between surprise and anticipated tax changes using a timing convention. We document that pre-announced but not yet implemented tax cuts give rise to contractions in output,...

This is the technical appendix to the computer simulations in the American Economic Review publication by Julio Rotemberg and Michael Woodford, Real-Business-Cycle Models and the Forecastable Movements in Output, Hours, and Consumption, 1996

This paper examines the regions of indeterminacy in a two-sector real business cycle model with consumption habit formation and productive externalities. It is shown that the indeterminacy result is largely unaffected when consumption habits are introduced. The paper also demonstrates that habit...

Consumption and investment comove over the business cycle in response to shocks that permanently move the price of investment. The interpretation of these shocks has relied on standard one-sector models or on models with two or more sectors that can be aggregated. However, the same...