TY  - JOUR
AU  - Beaudry,Paul
AU  - Collard,Fabrice
AU  - Portier,Franck
TI  - Gold Rush Fever in Business Cycles
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 12710
PY  - 2006
Y2  - November 2006
UR  - http://www.nber.org/papers/w12710
L1  - http://www.nber.org/papers/w12710.pdf
N1  - Author contact info:
Paul Beaudry
Department of Economics
University of British Columbia
Vancouver, Canada
Tel: 604/822-8624
Fax: 604/822-5915
E-Mail: paulbe@interchange.ubc.ca

Fabrice Collard
University of Toulouse
Manufacture des Tabacs
21 Allee de Brienne
31000 Toulouse, France
E-Mail: fabrice.collard@univ-tlse1.fr

Franck Portier
GREMAQ-IDEI
University of Toulouse
Manufacture des Tabacs
21 Allee de Brienne
31000 Toulouse, FRANCE
Tel: fax 05-61-12-8637;  fportier@cict.fr
E-Mail: fportier@cict.fr
AB  - Gold rushes are periods of economic boom, generally associated with large increases in expenditures aimed at securing claims near new found veins of gold. An interesting aspect of gold rushes is that, from a social point of view, much of the increased activity is wasteful since it contributes simply to the expansion of the stock of money.  In this paper, we explore whether business cycle fluctuations may sometimes be driven by a phenomenon akin to a gold rush. In particular, we present a model where the opening of new market opportunities causes an economic expansion by favoring competition for market share, which is essentially a dissolution of rents. We call such an episode a market rush.  We construct a simple model of a market rush that can be embedded into an otherwise standard Dynamic General Equilibrium model, and show how market rushes can help explain important features of the data.  We use a simulated-moment estimator to quantify the role of market rushes in fluctuations.  We find that market rushes may account for over half the short run volatility in hours worked and  a third of the short run volatility of output.
ER  -