Aggregate Shocks or Aggregate Information? Costly Information and Business Cycle Comovement

No 12557, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Synchronized expansions and contractions across sectors define business cycles. Yet synchronization is puzzling because productivity across sectors exhibits weak correlation. While previous work examined production complementarity, our analysis explores complementarity in information acquisition. Because information about future productivity has a high fixed cost of production and a low marginal cost of replication, sectors can share the cost to forecast their sector-specific productivity. Sectors with common, aggregate information make highly correlated productions choices. By filtering out sector-specific shocks and transmitting aggregate ones, information markets amplify business-cycle comovement.

JEL-codes: D82 E32 (search for similar items in EconPapers)
Date: 2006-10
Note: AP EFG ME
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published as Veldkamp, Laura & Wolfers, Justin, 2007. "Aggregate shocks or aggregate information? Costly information and business cycle comovement," Journal of Monetary Economics, Elsevier, vol. 54(Supplemen), pages 37-55, September.

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Related works:
Journal Article: Aggregate shocks or aggregate information? Costly information and business cycle comovement (2007)
Working Paper: Aggregate Shocks or Aggregate Information? Costly Information and Business Cycle Comovement (2006)
Working Paper: Aggregate shocks or aggregate information? costly information and business cycle comovement (2006)
Working Paper: Aggregate Shocks or Aggregate Information? Costly Information and Business Cycle Comovement (2006)
Working Paper: Aggregate Shocks or Aggregate Information? Costly Information and Business Cycle Comovement (2006)
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