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The econometrics of the general equilibrium approach to business cycles

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  • Finn E. Kydland
  • Edward C. Prescott

Abstract

The founding fathers of the Econometric Society defined econometrics to be quantitative economic theory. A vision of theirs was the use of econometrics to provide quantitative answers to business cycle questions. The realization of this dream required a number of advances in pure theory?in particular, the development of modern general equilibrium theory. The econometric problem is how to use these tools along with measurement to answer business cycles questions. In this essay, we review this econometric development and contrast it with the econometric approach that preceded it.

Suggested Citation

  • Finn E. Kydland & Edward C. Prescott, 1990. "The econometrics of the general equilibrium approach to business cycles," Staff Report 130, Federal Reserve Bank of Minneapolis.
  • Handle: RePEc:fip:fedmsr:130
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    References listed on IDEAS

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    2. Olkhov, Victor, 2019. "New Essentials of Economic Theory," MPRA Paper 95065, University Library of Munich, Germany.
    3. Olkhov, Victor, 2019. "New Essentials of Economic Theory I. Assumptions, Economic Space and Variables," MPRA Paper 93085, University Library of Munich, Germany.
    4. Martha Misas Arango & Enrique López Enciso & Diego Vásquez Escobar, 2004. "Tendencias Estocásticas Comunes y Fluctuaciones en la Economía Colombiana: 1950-2002," BORRADORES DE ECONOMIA 003550, BANCO DE LA REPÚBLICA.
    5. Victor Olkhov, 2019. "Financial Variables, Market Transactions, and Expectations as Functions of Risk," IJFS, MDPI, vol. 7(4), pages 1-27, November.
    6. Olkhov, Victor, 2019. "Methods of Economic Theory: Variables, Transactions and Expectations as Functions of Risks," MPRA Paper 95628, University Library of Munich, Germany.
    7. In Choi & Peter C.B. Phillips, 1997. "Regressions for Partially Identified, Cointegrated Simultaneous Equations," Cowles Foundation Discussion Papers 1162, Cowles Foundation for Research in Economics, Yale University.

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    Keywords

    Econometrics; Business cycles;

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