Advanced Search
MyIDEAS: Login to save this paper or follow this series

Modeling Time and Macroeconomic Dynamics

Contents:

Author Info

  • Chryssi Giannitsarou

    (University of Cambridge)

  • Alexia Anagnostopoulos

    (London Business School)

Abstract

In this paper, we analyze the importance of the frequency of decision making for macroeconomic dynamics. We explain how the frequency of decision making (period length) and the unit of time measurement (calibration frequency) differ and study the implications of this difference for macroeconomic modelling. We construct a generic dynamic general equilibrium model that nests a wide range of macroeconomic models and which leaves the period length as an undetermined parameter. We provide a series of examples (variations of the Cass-Koopmans and the New Keynesian models) that fit into this framework and use these to do comparative dynamics with respect to the period length. In particular, we analyze local stability and how this is affected by changes in the period length. We find that in models with endogenous capital accumulation, as the period gets longer, indeterminacy occurs less often. Moreover, as economic agents become less patient and as capital depreciates more, indeterminacy also occurs less often. We also show that, in the case of the New Keynesian model, standard continuous and discrete time versions have entirely different local stability properties due to a discontinuity at zero period length.

(This abstract was borrowed from another version of this item.)

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://repec.org/mmfc05/paper60.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Money Macro and Finance Research Group in its series Money Macro and Finance (MMF) Research Group Conference 2005 with number 60.

as in new window
Length:
Date of creation: 03 Sep 2005
Date of revision:
Handle: RePEc:mmf:mmfc05:60

Contact details of provider:
Web page: http://www.essex.ac.uk/afm/mmf/index.html

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

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. Mauro BAMBI & Omar LICANDRO, 2004. "(In)determinacy and Time-to-Build," Economics Working Papers ECO2004/17, European University Institute.
  2. Benhabib, J. & Farmer, R.E.A, 1991. "Indeterminacy and Increasing Returns," Papers 165, Cambridge - Risk, Information & Quantity Signals.
  3. Kazuo Mino & Kazuo Nishimura & Koji Shimomura & Ping Wang, 2008. "Equilibrium dynamics in discrete-time endogenous growth models with social constant returns," Economic Theory, Springer, vol. 34(1), pages 1-23, January.
  4. Siu Fai Leung, 1995. "A distinction between continuous-time and discrete-time models of uncertain lifetime," Economics Letters, Elsevier, vol. 47(3-4), pages 291-296, March.
  5. Kevin X. D. Huang & Qinglai Meng, 2007. "Capital and macroeconomic instability in a discrete-time model with forward-looking interest rate rules," Working Papers 07-4, Federal Reserve Bank of Philadelphia.
  6. Schmitt-Grohe, Stephanie & Uribe, Martin, 1997. "Balanced-Budget Rules, Distortionary Taxes, and Aggregate Instability," Journal of Political Economy, University of Chicago Press, vol. 105(5), pages 976-1000, October.
  7. Luis A. Puch & Omar Licandro, 2006. "Is Discrete Time a Good Representation of Continuous Time?," Working Papers 2006-20, FEDEA.
  8. Benhabib, Jess, 2004. "Interest Rate Policy in Continuous Time with Discrete Delays," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 36(1), pages 1-15, February.
  9. Guo, Jang-Ting, 2004. "Increasing returns, capital utilization, and the effects of government spending," Journal of Economic Dynamics and Control, Elsevier, vol. 28(6), pages 1059-1078, March.
  10. Turnovsky, Stephen J & Burmeister, Edwin, 1977. "Perfect Foresight, Expectational Consistency, and Macroeconomic Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 85(2), pages 379-93, April.
  11. Farmer Roger E. A. & Guo Jang-Ting, 1994. "Real Business Cycles and the Animal Spirits Hypothesis," Journal of Economic Theory, Elsevier, vol. 63(1), pages 42-72, June.
  12. Gary Hansen, 2010. "Indivisible Labor and the Business Cycle," Levine's Working Paper Archive 233, David K. Levine.
  13. Fabrice Collard & Omar Licandro & Luis A. Puch, 2006. "Time-to-Build Echoes," Working Papers 2006-16, FEDEA.
  14. Charles T. Carlstrom & Timothy S. Fuerst, 2003. "Investment and interest rate policy: a discrete time analysis," Working Paper 0320, Federal Reserve Bank of Cleveland.
  15. Dupor, Bill, 2001. "Investment and Interest Rate Policy," Journal of Economic Theory, Elsevier, vol. 98(1), pages 85-113, May.
  16. Hintermaier, Thomas, 2005. "A sunspot paradox," Economics Letters, Elsevier, vol. 87(2), pages 285-290, May.
  17. Marianne Baxter & Robert G. King, 1991. "Productive externalities and business cycles," Discussion Paper / Institute for Empirical Macroeconomics 53, Federal Reserve Bank of Minneapolis.
  18. Mercenier, Jean & Michel, Philippe, 1994. "Discrete-Time Finite Horizon Appromixation of Infinite Horizon Optimization Problems with Steady-State Invariance," Econometrica, Econometric Society, vol. 62(3), pages 635-56, May.
  19. Kevin X.D. Huang & David Aadland, 2003. "Consistent High-Frequency Calibration," Computing in Economics and Finance 2003 172, Society for Computational Economics.
  20. Foley, Duncan K, 1975. "On Two Specifications of Asset Equilibrium in Macroeconomic Models," Journal of Political Economy, University of Chicago Press, vol. 83(2), pages 303-24, April.
  21. Turnovsky, Stephen J, 1977. "On the Formulation of Continuous Time Macroeconomic Models with Asset Accumulation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 18(1), pages 1-28, February.
  22. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 50(6), pages 1345-70, November.
  23. Mitra, Tapan, 1998. "On the relationship between discounting and complicated behavior in dynamic optimization models," Journal of Economic Behavior & Organization, Elsevier, vol. 33(3-4), pages 421-434, January.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Omar Licandro & Luis A. Puch, 2006. "Is Discrete Time a Good Representation of Continuous Time?," Economics Working Papers ECO2006/28, European University Institute.
  2. Nicolas Abad & Thomas Seegmuller & Alain Venditti, 2013. "Aggregate Instability under Labor Income Taxation and Balanced-Budget Rules: Preferences Matter," Working Papers halshs-00793213, HAL.
  3. repec:hal:journl:halshs-00384513 is not listed on IDEAS
  4. Franke, Reiner & Sacht, Stephen, 2010. "Some observations in the high-frequency versions of a standard New-Keynesian model," MPRA Paper 33358, University Library of Munich, Germany, revised Jun 2011.
  5. Steffen Ahrens & Stephen Sacht, 2014. "Estimating a high-frequency New-Keynesian Phillips curve," Empirical Economics, Springer, vol. 46(2), pages 607-628, March.
  6. Sacht, Stephen, 2014. "Analysis of various shocks within the high-frequency versions of the baseline New-Keynesian model," Economics Working Papers 2014-02, Christian-Albrechts-University of Kiel, Department of Economics.

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:mmf:mmfc05:60. 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: (Christopher F. Baum).

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.