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A progress report on business cycle models

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Author Info
Ellen R. McGrattan

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Abstract

This article reports the recent progress made by researchers trying to build business cycle models that can reliably reproduce aggregate U.S. time series. The article first describes some features of the U.S. data that the models are meant to reproduce. Then it describes a version of the standard business cycle model, along with the indivisible labor extension of that model, both of which assume that fluctuations in economic activity are caused only by shocks to technology. Finally, it describes a version of recent other extensions which assume that shocks to fiscal variables also contribute to the fluctuations. Adding fiscal shocks to standard business cycle models is shown to significantly improve their ability to mimic some of the data.

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

Volume (Year): (1994)
Issue (Month): Fall ()
Pages: 2-16
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Handle: RePEc:fip:fedmqr:y:1994:i:fall:p:2-16:n:v.18no.4

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Related research
Keywords: Business cycles;

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Edward C. Prescott, 1986. "Theory ahead of business cycle measurement," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall, pages 9-22. [Downloadable!]
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  2. Anton Braun, R., 1994. "Tax disturbances and real economic activity in the postwar United States," Journal of Monetary Economics, Elsevier, vol. 33(3), pages 441-462, June. [Downloadable!] (restricted)
  3. Hansen, Gary D., 1985. "Indivisible labor and the business cycle," Journal of Monetary Economics, Elsevier, vol. 16(3), pages 309-327, November. [Downloadable!] (restricted)
  4. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 50(6), pages 1345-70, November. [Downloadable!] (restricted)
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  5. Seater, John J., 1985. "On the construction of marginal federal personal and social security tax rates in the U.S," Journal of Monetary Economics, Elsevier, vol. 15(1), pages 121-135, January. [Downloadable!] (restricted)
  6. Rogerson, Richard, 1988. "Indivisible labor, lotteries and equilibrium," Journal of Monetary Economics, Elsevier, vol. 21(1), pages 3-16, January. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Beatriz de Blas, 2005. "Performance of Interest Rate Rules under Credit Market Imperfections," Faculty Working Papers 16/05, School of Economics and Business Administration, University of Navarra. [Downloadable!]
    Other versions:
  2. Lawrence J. Christiano & Richard M. Todd, 2000. "The Conventional Treatment of Seasonality in Business Cycle Analysis: Does it Create Distortions?," NBER Technical Working Papers 0266, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  3. Raphael Bergoeing & Felipe Morandé, 2002. "Crecimiento, empleo e impuestos al trabajo: Chile 1998-2001," Documentos de Trabajo 127, Centro de Economía Aplicada, Universidad de Chile. [Downloadable!]
    Other versions:
  4. Harold L. Cole & Lee E. Ohanian, 1999. "Aggregate returns to scale: why measurement is imprecise," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Sum, pages 19-28. [Downloadable!]
  5. S. Brock Blomberg & Gregory D. Hess, 2000. "Is the political business cycle for real?," Working Paper 0016, Federal Reserve Bank of Cleveland. [Downloadable!]
    Other versions:
  6. Eric T. Swanson, 1999. "Measuring the cyclicality of real wages: how important is aggregation across industries?," Finance and Economics Discussion Series 1999-52, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
  7. Roberto de Góes Ellery Junior & Victor Gomes & Adolfo Sachsida, 2002. "Business Cycle Fluctuations in Brazil," Revista Brasileira de Economia, Graduate School of Economics, Getulio Vargas Foundation (Brazil), vol. 56(2), April. [Downloadable!]
  8. Raphael Bergoeing & Raimundo Soto, 2002. "Testing Real Business Cycles Models in an Emerging Economy," Working Papers Central Bank of Chile 159, Central Bank of Chile. [Downloadable!]
    Other versions:
  9. Ellen R. McGrattan & Lee E. Ohanian, 2006. "Does Neoclassical Theory Account for the Effects of Big Fiscal Shocks? Evidence From World War II," NBER Working Papers 12130, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  10. Becker, Torbjörn, 1995. "Risky Taxes, Budget Balance Preserving Spreads and Precautionary Savings," Working Paper Series in Economics and Finance 73, Stockholm School of Economics. [Downloadable!]
  11. Canton, E., 1997. "Fiscal policy in a stochastic model of endogenous growth," Discussion Paper 63, Tilburg University, Center for Economic Research. [Downloadable!]
    Other versions:
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