We propose a mechanism that explains standard stylized facts in both international macroeconomics and finance. To do so, we develop New Keynesian DSGE model with financial frictions à la Bernanke et al. (1999), which depart from the full-information rational expectations (FIRE) assumption. The key ingredient is home information bias (HIB) expectations. While FIRE predicts high consumption co-mo...

viewpoints related to busines cycles fluctutions and their use in economic anticipation process have drawn the attention of various intellectual spectrum and economic schools. this has, in turn, caused the formation of a modern scientific area known as future study. according to the major aims of this field of this field of knowledge, business cycles future changes and the variables affecting t...

A. Topics and Tools ............................................................................ 1 B. Walrasian vs. Keynesian Explanations of Business Cycles ........................ 3 Why do we have multiple theories of business cycles? ....................................................... 3 Classification of business-cycle models ................................................................

The Real Business Cycle (RBC) research program has grown spectacularly over the last decade, as its concepts and methods have diffused into mainstream macroeconomics. Yet, there is increasing skepticism that technology shocks are a major source o f business fluctuations. This chapter exposits the basic RBC model and shows that it requires large technology shocks to produce realistic business cy...

If the benchmark model without frictions can replicate the stylized facts of the business cycle, the cycles may be just an efficient phenomenon generated by markets in response to certain shocks, such as, for example, productivity shocks. Furthermore, if markets are complete and individuals can diversify risk, Lucas (1987) calculated the welfare cost of the aggregate fluctuations to be negligible.

This paper documents the dynamic properties of national output, its components, and the current account for five OECD countries. There is strong evidence of conditional volatility for almost all time series as well as significant deviations from normality. The deviations are detected particularly in GDP, net exports, investment time series. JEL Codes:

Output growth in the U.S., a commodity-importing country, increases its demand for imports of commodities and therefore commodity prices, which benefits commodityexporting countries but has adverse effects on commodity-importing countries. Hence, in the data, U.S. output is more positively correlated with outputs of commodity-exporting countries than commodity-importing countries. In other word...