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Endogenous business cycles and the dynamics of output, hours, and consumption

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Author Info
Stephanie Schmitt-Grohe () (Rutgers University)

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Abstract

This paper studies the business-cycle fluctuations predicted by a two-sector endogenous-business-cycle model with sector-specific external increasing returns to scale. It focuses on aspects of actual fluctuations that have been identified both as defining features of the business cycle and as ones that standard real-business-cycle models cannot explain: the autocorrelation function of output growth, the impulse response function of output to demand shocks, and the forecastable movements of output, hours, and consumption. For empirically realistic calibrations of the degree of sector-specific external returns to scale, the results suggest that endogenous fluctuations do not provide the dynamic element that is missing in existing real-business-cycle models.

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Publisher Info
Paper provided by Rutgers University, Department of Economics in its series Departmental Working Papers with number 199915.

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Date of creation: 23 Sep 1999
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Handle: RePEc:rut:rutres:199915

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Related research
Keywords: Business Cycles; Expectations-driven fluctuations;

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Find related papers by JEL classification:
E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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    Other versions:
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  16. Stephanie Schmitt-Grohe, 1995. "Comparing four models of aggregate fluctuations due to self-fulfilling expectations," Finance and Economics Discussion Series 95-17, Board of Governors of the Federal Reserve System (U.S.).
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