Advanced Search
MyIDEAS: Login

Macroeconomic Frictions: What have we Learned from the Real Business Cycle Research Programm ?

Contents:

Author Info

  • Jean-Pierre DANTHINE
  • John B. DONALDSON

Abstract

One interpretation of the RBC research program is that it was meant to identify and incorporate into dynamic general equilibrium models those market imperfections which are most relevant for macroeconomic theory and policy. This paper reviews the methodological basis for this interpretation. It then discusses the empirical foundations for some of the many frictions that have found their way into RBC models including efficiency wages, labour contracts, nominal price rigidities, limited market participation, imperfect competition and expectational errors. We find that the 'necessity' of these frictions is better established in some cases than in others. While one is lead to the prediction that the 'next neo-classical synthesis' will be a dynamic stochastic general equilibrium with frictions, it is premature to decide which specific friction will necessarily be taken on board.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.hec.unil.ch/deep/textes/9919.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Université de Lausanne, Faculté des HEC, DEEP in its series Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) with number 9919.

as in new window
Length: 26 pages
Date of creation: Nov 1999
Date of revision:
Publication status: Published in Advances in Macroeconomic Theory, J. Drèze (ed), IEA Conference volume No 133, Palgrave, 2001, pp. 56-75
Handle: RePEc:lau:crdeep:9919

Contact details of provider:
Postal: Université de Lausanne, Faculté des HEC, DEEP, Internef, CH-1015 Lausanne
Phone: ++41 21 692.33.64
Fax: ++41 21 692.33.05
Email:
Web page: http://www.hec.unil.ch/deep/publications/cahiers/series
More information through EDIRC

Related research

Keywords: Business cycle; neo-classical synthesis; market frictions;

Find related papers by JEL classification:

References

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.:
as in new window
  1. Merz, Monika, 1995. "Search in the labor market and the real business cycle," Journal of Monetary Economics, Elsevier, vol. 36(2), pages 269-300, November.
  2. Edward C. Prescott, 1986. "Theory ahead of business cycle measurement," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall, pages 9-22.
  3. Gomes, Joao F & Greenwood, Jeremy & Rebelo, Sérgio, 1997. "Equilibrium Unemployment," CEPR Discussion Papers 1602, C.E.P.R. Discussion Papers.
  4. Christiano, Lawrence J. & Eichenbaum, Martin & Evans, Charles L., 1999. "Monetary policy shocks: What have we learned and to what end?," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 2, pages 65-148 Elsevier.
  5. Uhlig, H.F.H.V.S., 1999. "What are the Effects of Monetary Policy on Output? Results from an Agnostic Identification Procedure," Discussion Paper 1999-28, Tilburg University, Center for Economic Research.
  6. Timothy Cogley & James M. Nason, 1993. "Output dynamics in real business cycle models," Working Papers in Applied Economic Theory 93-10, Federal Reserve Bank of San Francisco.
  7. Mehra, Rajnish & Prescott, Edward C., 1985. "The equity premium: A puzzle," Journal of Monetary Economics, Elsevier, vol. 15(2), pages 145-161, March.
  8. Christiano, Lawrence J. & Eichenbaum, Martin & Evans, Charles L., 1997. "Sticky price and limited participation models of money: A comparison," European Economic Review, Elsevier, vol. 41(6), pages 1201-1249, June.
  9. Collard, Fabrice & de la Croix, David, 1996. "Gift exchange and the business cycle: the fair wage strikes back," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 1997008, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES), revised 00 Apr 1997.
  10. Marvin Goodfriend & Robert King, 1997. "The New Neoclassical Synthesis and the Role of Monetary Policy," NBER Chapters, in: NBER Macroeconomics Annual 1997, Volume 12, pages 231-296 National Bureau of Economic Research, Inc.
  11. Richard Clarida & Jordi Galí & Mark Gertler, 1997. "The science of monetary policy: A new Keynesian perspective," Economics Working Papers 356, Department of Economics and Business, Universitat Pompeu Fabra, revised Apr 1999.
  12. Lucas, Robert E., 1977. "Understanding business cycles," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 5(1), pages 7-29, January.
  13. Cooley, Thomas F. & Quadrini, Vincenzo, 2004. "Optimal monetary policy in a Phillips-curve world," Journal of Economic Theory, Elsevier, vol. 118(2), pages 174-208, October.
  14. Lucas, Robert Jr., 1990. "Liquidity and interest rates," Journal of Economic Theory, Elsevier, vol. 50(2), pages 237-264, April.
  15. Gary D. Hansen & Randall Wright, 1992. "The labor market in real business cycle theory," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Spr, pages 2-12.
  16. Robert G. King & Mark W. Watson, 1995. "Money, prices, interest rates and the business cycle," Working Paper Series, Macroeconomic Issues 95-10, Federal Reserve Bank of Chicago.
  17. Hess, Gregory D & Shin, Kwanho, 1997. "International and Intranational Business Cycles," Oxford Review of Economic Policy, Oxford University Press, vol. 13(3), pages 93-109, Autumn.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:lau:crdeep:9919. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Claudine Delapierre Saudan).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.