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RBC Methodology and the Development of Aggregate Economic Theory

In: Handbook of Macroeconomics

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  • Prescott, E.C.

Abstract

This essay reviews the development of neoclassical growth theory, a unified theory of aggregate economic phenomena that was first used to study business cycles and aggregate labor supply. Subsequently, the theory has been used to understand asset pricing, growth miracles and disasters, monetary economics, capital accounts, aggregate public finance, economic development, and foreign direct investment.

Suggested Citation

  • Prescott, E.C., 2016. "RBC Methodology and the Development of Aggregate Economic Theory," Handbook of Macroeconomics, in: J. B. Taylor & Harald Uhlig (ed.), Handbook of Macroeconomics, edition 1, volume 2, chapter 0, pages 1759-1787, Elsevier.
    • Handle: RePEc:eee:macchp:v2-1759
    DOI: 10.1016/bs.hesmac.2016.03.001
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    45. Harold L. Cole & Lee E. Ohanian, 2004. "New Deal Policies and the Persistence of the Great Depression: A General Equilibrium Analysis," Journal of Political Economy, University of Chicago Press, vol. 112(4), pages 779-816, August.
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    49. Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-491, June.
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    2. V. Kerry Smith & Min Qiang Zhao, 2016. "Evaluating Economy-Wide Benefit Cost Analyses," NBER Working Papers 22769, National Bureau of Economic Research, Inc.
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    More about this item

    Keywords

    Neoclassical growth theory; Aggregate economic theory; RBC methodology; Aggregation; Business cycle fluctuations; Development; Aggregate financial economics; Prosperities; Depressions; B4; C10; E00; E13; E32; E60;
    All these keywords.

    JEL classification:

    • B4 - Schools of Economic Thought and Methodology - - Economic Methodology
    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • E00 - Macroeconomics and Monetary Economics - - General - - - General
    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General

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