Explaining the Last Consumption Boom-Bust Cycle in Ireland : The Role of News and Noise Shocks
The objective of the paper is to explain the last boom and bust in consumption in Ireland by the failure of consumers to correctly distinguish permanent changes in productivity from temporary changes. It uses a business cycle model, where agents up...
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
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World Bank, Washington, DC
2013
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| Online Access: | http://documents.worldbank.org/curated/en/2013/06/17942511/explaining-last-consumption-boom-bust-cyclein-ireland-role-news-noise-shocks-explaining-last-consumption-boom-bust-cycle-ireland-role-news-noise-shocks http://hdl.handle.net/10986/15883 |
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okr-10986-158832021-04-23T14:03:26Z Explaining the Last Consumption Boom-Bust Cycle in Ireland : The Role of News and Noise Shocks Diaz Sanchez, Jose Luis AGGREGATE DEMAND BELIEFS BUSINESS CYCLES CENTRAL BANK CONSUMER EXPECTATIONS CONSUMERS CONSUMPTION DECISIONS CONSUMPTION EXPENDITURES CONSUMPTION LEVELS DEVELOPMENT ECONOMICS DEVELOPMENT POLICY DISCUSSIONS E-MAIL ECONOMETRICS ECONOMIC THEORY EMPLOYMENT EXPECTED VALUE EXPLORATION FINANCIAL SECTOR ICT IDEA IDEAS INCOME INTUITION LABOR PRODUCTIVITY LEADING LEARNING MAXIMUM LIKELIHOOD ESTIMATION OPEN ACCESS PERSONAL CONSUMPTION PRODUCTION FUNCTION PRODUCTIVITY PRODUCTIVITY GROWTH RATIONAL EXPECTATIONS REAL GDP RESULT RESULTS USES WEB news shocks long-run productivity The objective of the paper is to explain the last boom and bust in consumption in Ireland by the failure of consumers to correctly distinguish permanent changes in productivity from temporary changes. It uses a business cycle model, where agents update their beliefs about long-run productivity using information -that they receive continuously- about the future state of the economy. The analysis finds that a large and prolonged disconnect between consumption and long-run productivity occurred in the years leading to the economic crisis, which led to -- over-consumption -- for several quarters. A strong downward adjustment in 2008 followed when Irish consumers finally realized their mistake. 2013-09-26T19:34:45Z 2013-09-26T19:34:45Z 2013-06 http://documents.worldbank.org/curated/en/2013/06/17942511/explaining-last-consumption-boom-bust-cyclein-ireland-role-news-noise-shocks-explaining-last-consumption-boom-bust-cycle-ireland-role-news-noise-shocks http://hdl.handle.net/10986/15883 English en_US Policy Research Working Paper;No. 6525 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research Europe and Central Asia Ireland |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English en_US |
| topic |
AGGREGATE DEMAND BELIEFS BUSINESS CYCLES CENTRAL BANK CONSUMER EXPECTATIONS CONSUMERS CONSUMPTION DECISIONS CONSUMPTION EXPENDITURES CONSUMPTION LEVELS DEVELOPMENT ECONOMICS DEVELOPMENT POLICY DISCUSSIONS ECONOMETRICS ECONOMIC THEORY EMPLOYMENT EXPECTED VALUE EXPLORATION FINANCIAL SECTOR ICT IDEA IDEAS INCOME INTUITION LABOR PRODUCTIVITY LEADING LEARNING MAXIMUM LIKELIHOOD ESTIMATION OPEN ACCESS PERSONAL CONSUMPTION PRODUCTION FUNCTION PRODUCTIVITY PRODUCTIVITY GROWTH RATIONAL EXPECTATIONS REAL GDP RESULT RESULTS USES WEB news shocks long-run productivity |
| spellingShingle |
AGGREGATE DEMAND BELIEFS BUSINESS CYCLES CENTRAL BANK CONSUMER EXPECTATIONS CONSUMERS CONSUMPTION DECISIONS CONSUMPTION EXPENDITURES CONSUMPTION LEVELS DEVELOPMENT ECONOMICS DEVELOPMENT POLICY DISCUSSIONS ECONOMETRICS ECONOMIC THEORY EMPLOYMENT EXPECTED VALUE EXPLORATION FINANCIAL SECTOR ICT IDEA IDEAS INCOME INTUITION LABOR PRODUCTIVITY LEADING LEARNING MAXIMUM LIKELIHOOD ESTIMATION OPEN ACCESS PERSONAL CONSUMPTION PRODUCTION FUNCTION PRODUCTIVITY PRODUCTIVITY GROWTH RATIONAL EXPECTATIONS REAL GDP RESULT RESULTS USES WEB news shocks long-run productivity Diaz Sanchez, Jose Luis Explaining the Last Consumption Boom-Bust Cycle in Ireland : The Role of News and Noise Shocks |
| geographic_facet |
Europe and Central Asia Ireland |
| relation |
Policy Research Working Paper;No. 6525 |
| description |
The objective of the paper is to explain
the last boom and bust in consumption in Ireland by the
failure of consumers to correctly distinguish permanent
changes in productivity from temporary changes. It uses a
business cycle model, where agents update their beliefs
about long-run productivity using information -that they
receive continuously- about the future state of the economy.
The analysis finds that a large and prolonged disconnect
between consumption and long-run productivity occurred in
the years leading to the economic crisis, which led to --
over-consumption -- for several quarters. A strong downward
adjustment in 2008 followed when Irish consumers finally
realized their mistake. |
| format |
Publications & Research :: Policy Research Working Paper |
| author |
Diaz Sanchez, Jose Luis |
| author_facet |
Diaz Sanchez, Jose Luis |
| author_sort |
Diaz Sanchez, Jose Luis |
| title |
Explaining the Last Consumption Boom-Bust Cycle in Ireland : The Role of News and Noise Shocks |
| title_short |
Explaining the Last Consumption Boom-Bust Cycle in Ireland : The Role of News and Noise Shocks |
| title_full |
Explaining the Last Consumption Boom-Bust Cycle in Ireland : The Role of News and Noise Shocks |
| title_fullStr |
Explaining the Last Consumption Boom-Bust Cycle in Ireland : The Role of News and Noise Shocks |
| title_full_unstemmed |
Explaining the Last Consumption Boom-Bust Cycle in Ireland : The Role of News and Noise Shocks |
| title_sort |
explaining the last consumption boom-bust cycle in ireland : the role of news and noise shocks |
| publisher |
World Bank, Washington, DC |
| publishDate |
2013 |
| url |
http://documents.worldbank.org/curated/en/2013/06/17942511/explaining-last-consumption-boom-bust-cyclein-ireland-role-news-noise-shocks-explaining-last-consumption-boom-bust-cycle-ireland-role-news-noise-shocks http://hdl.handle.net/10986/15883 |
| _version_ |
1764431854175256576 |