This article shows – on both conceptual and empirical grounds the importance of business cycles in affecting key relationships between innovation and international performance. While periods of upswing are characterised by a well documented „virtuous circle‟ between innovation inputs, new products and export success, during downswings most of the positive relationships and feedbacks tend to bre...

This paper uses a structural, large dimensional factor model to evaluate the role of ‘news’ shocks (shocks with a delayed effect on productivity) in generating the business cycle. We find that (i) existing small-scale VECM models are affected by ‘non-fundamentalness’ and therefore fail to recover the correct shock and impulse response functions; (ii) news shocks have a limited role in explainin...

Retailers, from fashion stores to grocery stores, have to decide what range of products to offer (assortment planning) and what prices to charge (price optimization). New business trends, such as mass customization and shorter product life cycles, make predicting demand more difficult, which in turn complicates assortment planning and price optimization. We propose and study a stochastic dynami...

The effectiveness of economic policies depends on the nature of expectations. Under adaptive expectations, the Philipps curve allows a governement to "surprise" agents. Under rational expectations, there is less room for economic policies. We assume that only an (endogenously determined) proportion of agents form rational expectations and show that this leads the government to optimal policies ...

I show how to construct a stochastic long-lived overlapping generations model, based on a non-stochastic model developed by Olivier Blanchard [2] and Philippe Weil [14], that nests the RBC model as a special case. My innovation over previous work is to add an aggregate stochastic shock. I provide three different calibrations of the model. One mimics the RBC model and the other two are heterogen...

T he discussion surrounding the recent deep recession seems to have shifted the focus from currently used business cycle models to the standard Keynesian model (by which we mean the “old Keynesian,” as opposed to the new Keynesian, model). In the Keynesian model, pessimism among consumers and investors about the economy will simultaneously lower aggregate consumption and aggregate investment, a...

A methodology based on the multivariate generalized Butterwoth filter for extracting the business cycles of the whole economy and of its productive sectors is developed. The method is then illustrated through an application to the Italian gross value added time series of the main economic sectors.

Equity price is cyclical and often leads the business cycle. These observations have led to the hypothesis that shocks to equity market liquidity are an independent source of the business cycle. In this paper I construct a tractable model to evaluate this hypothesis. After calibrating the model to the US data, I find that a negative liquidity shock in the equity market can generate large reduct...

In the context of a dynamic, stochastic, general equilibrium model, we perform classical maximum-likelihood and Bayesian estimations of the contribution of anticipated shocks to business cycles in the postwar United States. Our theoretical framework is a real-business-cycle model augmented with investment adjustment costs, variable capacity utilization, habit formation in consumption, and prefe...