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Demand Induced Fluctuations

Rios-Rull, J-V; Zhen, H; (2020) Demand Induced Fluctuations. Review of Economic Dynamics , 37 (Sup 1) S99-S117. 10.1016/j.red.2020.06.011. Green open access

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We build a variation of the neoclassical growth model in which households increased desire to save generate recessions. Our economy features three departures from the standard model: (1) goods markets (for nontradables) require active search from households wherein increases in consumption expenditures increase measured productivity; (2) adjustment costs make it difficult to expand the tradable goods sector by reallocating factors of production from nontradables to tradables; (3) labor markets have Nash bargaining wage setting and Mortensen-Pissarides search and matching frictions labor markets. These departures provide a novel quantitative theory to explain recessions like those in southern Europe without relying on technology shocks.

Type: Article
Title: Demand Induced Fluctuations
Open access status: An open access version is available from UCL Discovery
DOI: 10.1016/j.red.2020.06.011
Publisher version: https://doi.org/10.1016/j.red.2020.06.011
Language: English
Additional information: This version is the author accepted manuscript. For information on re-use, please refer to the publisher’s terms and conditions.
UCL classification: UCL
UCL > Provost and Vice Provost Offices
UCL > Provost and Vice Provost Offices > UCL SLASH
UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS
UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS > Dept of Economics
URI: https://discovery.ucl.ac.uk/id/eprint/10100848
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