Creator: Bryant, John B. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Dept.) Number: 99 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: Inventory cycle, Rational expectations, Disequilibrium, and Real goods market Subject (JEL): E30 - Prices, business fluctuations, and cycles - General and G31 - Corporate finance and governance - Capital budgeting ; Fixed investment and inventory studies
Creator: Anderson, Paul A. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Dept.) Number: 102 Keyword: Rational expectations, Hogs, Equilibrium, and Forecasting Subject (JEL): E30 - Prices, business fluctuations, and cycles - General and Q11 - Agriculture - Aggregate supply and demand analysis ; Prices
Creator: Bullard, James. and Duffy, John, 1964- Series: Joint committee on business and financial analysis Abstract:
Trend-cycle decomposition has been problematic in equilibrium business cycle research. Many models are fundamentally based on the concept of balanced growth, and so have clear predictions concerning the nature of the multivariate trend that should exist in the data if the model is correct. But the multivariate trend that is removed from the data in this literature is not the same one that is predicted by the model. This is understandable, because unexpected changes in trends are difficult to model under a rational expectations assumption. A learning assumption is more appropriate here. We include learning in a standard equilibrium business cycle model with explicit growth. We ask how the economy might react to the important trend-changing events of the postwar era in industrialized economies, such as the productivity slowdown, increased labor force participation by women, and the "new economy" of the 1990s. This tells us what the model says about the trend that should be taken out of the data before the business cycle analysis begins. Thus we use learning to address the trend-cycle decomposition problem that plagues equilibrium business cycle research. We argue that a model-consistent approach, such as the one we suggest here, is necessary if the goal is to obtain an accurate assessment of an equilibrium business cycle model.
Keyword: New economy, Learning, Business cycle fluctuations, Equilibrium business cycle theory, and Productivity slowdown Subject (JEL): E30 - Prices, business fluctuations, and cycles - General and E20 - Macroeconomics : Consumption, saving, production, employment, and investment - General
Creator: Aiyagari, S. Rao. and Wallace, Neil. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Dept.) 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 - Demand and supply of labor - Labor force and employment, size, and structure and E30 - Prices, business fluctuations, and cycles - General