Creator: Aiyagari, S. Rao and Wallace, Neil Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 226 Abstract:
This note presents a model whose competitive equilibrium can be consistent with the observation that current labor market conditions affect the well-being of new entrants more than they do that of senior workers. The model uses the notion that new entrants are not around soon enough to participate in risk-sharing contingent on the shocks that determine the equilibrium marginal products of first-period employment. This timing notion is formalized using a stochastic overlapping generations model.
A version of this paper was presented at the Econometric Society Summer Meeting, Cornell University, June 16-19, 1982.
Subject (JEL): J21 - Labor Force and Employment, Size, and Structure and E30 - Prices, Business Fluctuations, and Cycles: General (includes Measurement and Data)
Creator: Bryant, John B. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 099 Abstract:
This paper presents a monetarist model of the business cycle with price-setting firms. The model is estimated, and the point estimates used in simulations to illustrate the properties of the model. The real goods market is found to be stable, although subject to sharp changes in output. This model is consistent with rational expectations. Nevertheless, monetary policy can have a lasting impact, and the simulations show this to be the case. Fiscal policy too is found to influence the business cycle, but its short-run effects are substantially smaller than its impact effects. The possibility of an activist government policy in this model does not imply the efficiency of an activist policy.
Keyword: Real goods market, Inventory cycle, Rational expectations, and Disequilibrium Subject (JEL): E30 - Prices, Business Fluctuations, and Cycles: General (includes Measurement and Data) and G31 - Capital Budgeting; Fixed Investment and Inventory Studies; Capacity