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Theory ahead of business cycle measurement

  • Edward C. Prescott

Recent developments in business cycle theory are reviewed. The principal finding is that the growth model, which was developed to account for the secular patterns in important economic aggregates, displays the business cycle phenomena once it incorporates the observed randomness in the rate of technological advance. The amplitudes and serial correlation properties of fluctuations in output and employment that the growth model predicts match those historically experienced in the United States. Further, the model continues to display the growth facts it was developed to explain.

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Paper provided by Federal Reserve Bank of Minneapolis in its series Staff Report with number 102.

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Date of creation: 1986
Date of revision:
Publication status: Published in Quarterly Review, Fall 1986
Handle: RePEc:fip:fedmsr:102
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  1. R. Mehra & E. Prescott, 2010. "The equity premium: a puzzle," Levine's Working Paper Archive 1401, David K. Levine.
  2. Walter Dolde & James Tobin, 1971. "Wealth, Liquidity, and Consumption," Cowles Foundation Discussion Papers 311, Cowles Foundation for Research in Economics, Yale University.
  3. Swan, Trevor W, 2002. "Economic Growth," The Economic Record, The Economic Society of Australia, vol. 78(243), pages 375-80, December.
  4. Orley Ashenfelter, 1984. "Macroeconomic Analysis and Microeconomic Analyses of Labor Supply," NBER Working Papers 1500, National Bureau of Economic Research, Inc.
  5. Friend, Irwin & Blume, Marshall E, 1975. "The Demand for Risky Assets," American Economic Review, American Economic Association, vol. 65(5), pages 900-922, December.
  6. Martin S. Eichenbaum & Lars Peter Hansen & Kenneth J. Singleton, 1986. "A Time Series Analysis of Representative Agent Models of Consumption andLeisure Choice Under Uncertainty," NBER Working Papers 1981, National Bureau of Economic Research, Inc.
  7. T. W. Swan, 1956. "ECONOMIC GROWTH and CAPITAL ACCUMULATION," The Economic Record, The Economic Society of Australia, vol. 32(2), pages 334-361, November.
  8. Brock, William A. & Mirman, Leonard J., 1972. "Optimal economic growth and uncertainty: The discounted case," Journal of Economic Theory, Elsevier, vol. 4(3), pages 479-513, June.
  9. Long, John B, Jr & Plosser, Charles I, 1983. "Real Business Cycles," Journal of Political Economy, University of Chicago Press, vol. 91(1), pages 39-69, February.
  10. Lucas, Robert E, Jr & Prescott, Edward C, 1971. "Investment Under Uncertainty," Econometrica, Econometric Society, vol. 39(5), pages 659-81, September.
  11. Gilbert Ghez & Gary S. Becker, 1975. "The Allocation of Time and Goods over the Life Cycle," NBER Books, National Bureau of Economic Research, Inc, number ghez75-1, December.
  12. Lucas, Robert E., 1977. "Understanding business cycles," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 5(1), pages 7-29, January.
  13. Tjalling C. Koopmans, 1963. "On the Concept of Optimal Economic Growth," Cowles Foundation Discussion Papers 163, Cowles Foundation for Research in Economics, Yale University.
  14. Blinder, Alan S, 1986. "Can the Production Smoothing Model of Inventory Behavior Be Saved?," The Quarterly Journal of Economics, MIT Press, vol. 101(3), pages 431-53, August.
  15. Hansen, Lars Peter & Singleton, Kenneth J, 1983. "Stochastic Consumption, Risk Aversion, and the Temporal Behavior of Asset Returns," Journal of Political Economy, University of Chicago Press, vol. 91(2), pages 249-65, April.
  16. David Cass, 1964. "Optimum Economic Growth in an Aggregative Model of Capital Accumulation: A Turnpike Theorem," Cowles Foundation Discussion Papers 178, Cowles Foundation for Research in Economics, Yale University.
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  1. Quantitative Macroeconomics and Real Business Cycles (QM&RBC)

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