Expectation-Driven Boom-Bust Cycles

Marco Brianti and Vito Cormun ()
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Vito Cormun: Santa Clara University

No 2023-4, Working Papers from University of Alberta, Department of Economics

Abstract: Using data from the Survey of Professional Forecasters, we find that a large fraction of analysts’ expectations about future economic growth is not due to technology or other shocks to fundamentals. The co-movement pattern associated with these changes is different from the one driven by fundamental shocks. Specifically, a non-fundamental improvement in expectations of future output predicts boom bust dynamics in the key macroeconomic aggregates. We offer a novel theory that explains why boom-bust dynamics emerge in response to non-fundamental expectations shocks and not to technology shocks.

Keywords: Animal Spirit; Boom Bust; Business Cycle; Sunspot (search for similar items in EconPapers)
JEL-codes: C32 E32 (search for similar items in EconPapers)
Pages: 64 pages
Date: 2023-03-27
New Economics Papers: this item is included in nep-fdg
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Persistent link: https://EconPapers.repec.org/RePEc:ris:albaec:2023_004

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