ABSTRACT
Professor Sebastian's book sought to lay out the theoretical grounds for the detection and analysis of the immediate changes in agents' environment that triggered the recessions in Spain. The book achieved its goals while keeping within the conceptual structure provided by a selected mix of New Keynesian and New Classical assumptions. Professor Sebastian modeled the behavior of three representative agents: non-financial sector firms, banks, and consumers. All of them were assumed to respond with characteristic risk aversion to uncertainty and shocks. Professor Sebastian's important contribution consists in identifying and measuring the probable strength of his shocks impacting on the endogenous cyclical trend. Professor Sebastian's findings are a major contribution to our understanding of the historical record on fluctuations, and particularly of those sudden and significant changes that altered the cyclical trend. The dynamics of capital growth, intrinsically driven by profitability trends, also provides the setting for medium-term endogenous cycles, as well as the context for the study of short-term recessions.
