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Tuesday, February 17, 2015

'Animal Spirits and Business Cycles'

Human animals and their spirits:

Animal Spirits and Business Cycles, by Rhys Bidder, Economic Letter, FRBSF: What causes economic fluctuations? The economy is buffeted by many factors, such as technological advances, commodity price changes, and policy stimulus. But a long-running tradition attributes part of the ups and downs in the business cycle to changes in consumer sentiment, or “animal spirits.” Researchers have considered many approaches to explaining this nebulous concept. In this Economic Letter I discuss a novel strategy in Bidder and Smith (2012) that shows how changes in the variability of the economy, combined with the uncertainty people have over how the world works, can generate a phenomenon like animal spirits and, thus, drive business cycles. ...

    Posted by on Tuesday, February 17, 2015 at 01:52 PM in Economics | Permalink  Comments (5)


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