NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Sentiments and Aggregate Demand Fluctuations

Jess Benhabib, Pengfei Wang, Yi Wen

NBER Working Paper No. 18413
Issued in September 2012
NBER Program(s):   EFG

We formalize the Keynesian insight that aggregate demand driven by sentiments can generate output fluctuations under rational expectations. When production decisions must be made under imperfect information about demand, optimal decisions based on sentiments can generate stochastic self-fulfilling rational expectations equilibria in standard economies without persistent informational frictions, externalities, non-convexities or even strategic complementarities in production. The models we consider are deliberately simple, but could serve as benchmarks for more complicated equilibrium models with additional features.

You may purchase this paper on-line in .pdf format from SSRN.com ($5) for electronic delivery.

Information about Free Papers

You should expect a free download if you are a subscriber, a corporate associate of the NBER, a journalist, an employee of the U.S. federal government with a ".GOV" domain name, or a resident of nearly any developing country or transition economy.

If you usually get free papers at work/university but do not at home, you can either connect to your work VPN or proxy (if any) or elect to have a link to the paper emailed to your work email address below. The email address must be connected to a subscribing college, university, or other subscribing institution. Gmail and other free email addresses will not have access.

E-mail:

This paper was revised on July 9, 2014

Acknowledgments

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w18413

Users who downloaded this paper also downloaded these:
Benhabib, Wang, and Wen w18878 Uncertainty and Sentiment-Driven Equilibria
Ireland w18409 The Macroeconomic Effects of Interest on Reserves
Ordonez w18360 The Asymmetric Effects of Financial Frictions
Farmer w18421 Qualitative Easing: How it Works and Why it Matters
Gordon w18315 Is U.S. Economic Growth Over? Faltering Innovation Confronts the Six Headwinds
 
Publications
Activities
Meetings
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us