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Theory ahead of business cycle measurement

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  • Edward C. Prescott

Abstract

Recent developments in business cycle theory are reviewed. The principal finding is that the growth model, which was developed to account for the secular patterns in important economic aggregates, displays the business cycle phenomena once it incorporates the observed randomness in the rate of technological advance. The amplitudes and serial correlation properties of fluctuations in output and employment that the growth model predicts match those historically experienced in the United States. Further, the model continues to display the growth facts it was developed to explain.

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Bibliographic Info

Article provided by Federal Reserve Bank of Minneapolis in its journal Quarterly Review.

Volume (Year): (1986)
Issue (Month): Fall ()
Pages: 9-22

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Handle: RePEc:fip:fedmqr:y:1986:i:fall:p:9-22:n:v.10no.4

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Related research

Keywords: Business cycles;

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References

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  1. Lucas, Robert E, Jr & Prescott, Edward C, 1971. "Investment Under Uncertainty," Econometrica, Econometric Society, vol. 39(5), pages 659-81, September.
  2. T. W. Swan, 1956. "ECONOMIC GROWTH and CAPITAL ACCUMULATION," The Economic Record, The Economic Society of Australia, vol. 32(2), pages 334-361, November.
  3. Martin S. Eichenbaum & Lars Peter Hansen & Kenneth J. Singleton, 1986. "A Time Series Analysis of Representative Agent Models of Consumption andLeisure Choice Under Uncertainty," NBER Working Papers 1981, National Bureau of Economic Research, Inc.
  4. R. Mehra & E. Prescott, 2010. "The equity premium: a puzzle," Levine's Working Paper Archive 1401, David K. Levine.
  5. Swan, Trevor W, 2002. "Economic Growth," The Economic Record, The Economic Society of Australia, vol. 78(243), pages 375-80, December.
  6. Friend, Irwin & Blume, Marshall E, 1975. "The Demand for Risky Assets," American Economic Review, American Economic Association, vol. 65(5), pages 900-922, December.
  7. Alan S. Blinder, 1984. "Can The Production Smoothing Model of Inventory Behavior be Saved?," NBER Working Papers 1257, National Bureau of Economic Research, Inc.
  8. Hansen, Lars Peter & Singleton, Kenneth J, 1983. "Stochastic Consumption, Risk Aversion, and the Temporal Behavior of Asset Returns," Journal of Political Economy, University of Chicago Press, vol. 91(2), pages 249-65, April.
  9. Orley Ashenfelter, 1984. "Macroeconomic Analysis and Microeconomic Analyses of Labor Supply," NBER Working Papers 1500, National Bureau of Economic Research, Inc.
  10. Brock, William A. & Mirman, Leonard J., 1972. "Optimal economic growth and uncertainty: The discounted case," Journal of Economic Theory, Elsevier, vol. 4(3), pages 479-513, June.
  11. Tjalling C. Koopmans, 1963. "On the Concept of Optimal Economic Growth," Cowles Foundation Discussion Papers 163, Cowles Foundation for Research in Economics, Yale University.
  12. Long, John B, Jr & Plosser, Charles I, 1983. "Real Business Cycles," Journal of Political Economy, University of Chicago Press, vol. 91(1), pages 39-69, February.
  13. David Cass, 1964. "Optimum Economic Growth in an Aggregative Model of Capital Accumulation: A Turnpike Theorem," Cowles Foundation Discussion Papers 178, Cowles Foundation for Research in Economics, Yale University.
  14. Gilbert Ghez & Gary S. Becker, 1975. "The Allocation of Time and Goods over the Life Cycle," NBER Books, National Bureau of Economic Research, Inc, number ghez75-1, October.
  15. Walter Dolde & James Tobin, 1971. "Wealth, Liquidity, and Consumption," Cowles Foundation Discussion Papers 311, Cowles Foundation for Research in Economics, Yale University.
  16. Lucas, Robert E., 1977. "Understanding business cycles," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 5(1), pages 7-29, January.
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RePEc Biblio mentions

As found on the RePEc Biblio, the curated bibliography for Economics:
  1. > Schools of Economic Thought, Epistemology of Economics > Economic Methodology > Dynamic Stochastic General Equilibrium
  2. > Macroeconomics > Economic Fluctuations > Real Business Cycle Theory
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  1. Quantitative Macroeconomics and Real Business Cycles (QM&RBC)

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