Motivated by the effects of the COVID-19 pandemic, we present a theory of Keynesian
supply shocks: shocks that reduce potential output in a sector of the economy, but that, by …

We propose a new strategy for dissecting the macroeconomic time series, provide a
template for the business-cycle propagation mechanism that best describes the data, and …

There is a widespread belief that changes in expectations may be an important independent
driver of economic fluctuations. The news view of business cycles offers a formalization of …

We develop a tractable method for augmenting macroeconomic models with autonomous
variation in higher‐order beliefs. We use this to accommodate a certain type of waves of …

We estimate demand, supply, monetary, investment and financial shocks in a VAR identified
with a minimum set of sign restrictions on US data. We find that financial shocks are major …

In the last decade or so, the old “Pigouvian” hypothesis that good news about the future may
cause business cycle expansions—which in turn are reversed by less favorable news—has …

We study the relation between inflation and real activity over the business cycle. We employ
a Trend-Cycle VAR model to control for low-frequency movements in inflation …

We revisit the question of why shifts in aggregate demand drive business cycles. Our theory
combines intertemporal substitution in production with rational confusion, or bounded …

Bilateral bargaining between a multiple-worker firm and individual employees leads to
overhiring. With a concave production function, the firm can reduce the marginal product by …

This paper provides new evidence that bouts of optimism and pessimism are an important
source of US business cycles, using the identification schemes based on sign restrictions …