News about the Future Can Drive the Business Cycle, Study Finds
The article explores how news about the future can impact the business cycle. Most macroeconomic models struggle to explain why different sectors of the economy move together during economic ups and downs. The researchers developed a model that shows how both aggregate and sector-specific factors, like productivity and technical changes, can influence the economy. By considering factors like capital utilization, investment costs, and preferences, the model can capture how short-term changes in wealth affect labor supply. This unified model helps to better understand how news about the future can drive the business cycle.