IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper

The Evolution of Endogenous Business Cycles

  • Roger E. A. Farmer

    (University of California, Los Angeles and Hong Kong Institute for Monetary Research)

This paper distinguishes between two kinds of Endogenous Business Cycle models, and discusses the evolution from first generation EBC1 models to second generation EBC2 models. I argue that EBC1 models, which display dynamic indeterminacy, are part of the evolution of modern macroeconomics that has classical roots dating back to the 1920s. EBC2 models, which display steady-state indeterminacy, are a more radical departure from the classical Real Business Cycle model; they represent a return to one of the most important ideas to emerge from Keynes' (1936) General Theory; that high involuntary unemployment can persist as part of the steady-state equilibrium of a market economy.

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://www.hkimr.org/uploads/publication/343/wp-no-30_2012-final-.pdf
Download Restriction: no

Paper provided by Hong Kong Institute for Monetary Research in its series Working Papers with number 302012.

as
in new window

Length: 27 pages
Date of creation: Dec 2012
Date of revision:
Handle: RePEc:hkm:wpaper:302012
Contact details of provider: Postal:
55th Floor , Two International Finance Centre , 8 Finance Street , Central, Hong Kong

Phone: (852)2878 1978
Fax: (852)2878 7006
Web page: http://www.hkimr.org
Email:


More information through EDIRC

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. Azariadis, Costas, 1981. "Self-fulfilling prophecies," Journal of Economic Theory, Elsevier, vol. 25(3), pages 380-396, December.
  2. Roger E. A. Farmer, 2015. "The Stock Market Crash Really Did Cause the Great Recession," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 77(5), pages 617-633, October.
  3. Jess Benhabib & Pengfei Wang & Yi Wen, 2012. "Sentiments and Aggregate Demand Fluctuations," NBER Working Papers 18413, National Bureau of Economic Research, Inc.
  4. Peter A. Diamond, 1982. "Wage Determination and Efficiency in Search Equilibrium," Review of Economic Studies, Oxford University Press, vol. 49(2), pages 217-227.
  5. Cass, David & Shell, Karl, 1983. "Do Sunspots Matter?," Journal of Political Economy, University of Chicago Press, vol. 91(2), pages 193-227, April.
  6. Lawrence J. Christiano & Martin Eichenbaum & Charles Evans, 2001. "Nominal Rigidities and the Dynamic Effects of a Shock to Monetary Policy," NBER Working Papers 8403, National Bureau of Economic Research, Inc.
  7. Olivier J. Blanchard & Lawrence H. Summers, 1986. "Hysteresis and the European Unemployment Problem," Working papers 427, Massachusetts Institute of Technology (MIT), Department of Economics.
  8. Jess Benhabib & Roger E.A. Farmer, 1992. "Indeterminacy and Increasing Returns," UCLA Economics Working Papers 646, UCLA Department of Economics.
  9. Roger E. A. Farmer, 2008. "Aggregate demand and supply," International Journal of Economic Theory, The International Society for Economic Theory, vol. 4(1), pages 77-93.
  10. Stephanie Schmitt-Grohe, 1998. "Endogenous business cycles and the dynamics of output, hours, and consumption," Finance and Economics Discussion Series 1998-19, Board of Governors of the Federal Reserve System (U.S.).
  11. Benhabib, Jess & Farmer, Roger E.A., 1999. "Indeterminacy and sunspots in macroeconomics," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 6, pages 387-448 Elsevier.
  12. Mortensen, Dale T, 1970. "Job Search, the Duration of Unemployment, and the Phillips Curve," American Economic Review, American Economic Association, vol. 60(5), pages 847-62, December.
  13. Jordi Galí & Mark Gertler & J. David López-Salido, 2003. "Markups, Gaps, and the Welfare Costs of Business Fluctuations," Working Papers 45, Barcelona Graduate School of Economics.
  14. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 50(6), pages 1345-70, November.
  15. Roger E.A. Farmer & Jang Ting Guo, 1992. "Real Business Cycles and the Animal Spirits Hypothesis," UCLA Economics Working Papers 680, UCLA Department of Economics.
  16. Burnside, Craig, 1996. "Production function regressions, returns to scale, and externalities," Journal of Monetary Economics, Elsevier, vol. 37(2-3), pages 177-201, April.
  17. Farmer, Roger E A & Plotnikov, Dmitry, 2011. "Does Fiscal Policy Matter? Blinder and Solow Revisited," CEPR Discussion Papers 8189, C.E.P.R. Discussion Papers.
  18. Milton Friedman, 1957. "Introduction to "A Theory of the Consumption Function"," NBER Chapters, in: A Theory of the Consumption Function, pages 1-6 National Bureau of Economic Research, Inc.
  19. Paul Beaudry & Franck Portier, 2006. "Stock Prices, News, and Economic Fluctuations," American Economic Review, American Economic Association, vol. 96(4), pages 1293-1307, September.
  20. Farmer, Roger E A, 2000. "Natural Rate Doubts," CEPR Discussion Papers 2426, C.E.P.R. Discussion Papers.
  21. Farmer, Roger, 2010. "Expectations, Employment and Prices," OUP Catalogue, Oxford University Press, number 9780195397901, May.
  22. Farmer, Roger E A, 2011. "Animal Spirits, Financial Crises and Persistent Unemployment," CEPR Discussion Papers 8439, C.E.P.R. Discussion Papers.
  23. Mark Gertler & Luca Sala & Antonella Trigari, 2008. "An Estimated Monetary DSGE Model with Unemployment and Staggered Nominal Wage Bargaining," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 40(8), pages 1713-1764, December.
  24. Wen, Yi, 1998. "Capacity Utilization under Increasing Returns to Scale," Journal of Economic Theory, Elsevier, vol. 81(1), pages 7-36, July.
  25. Diamond, Peter A, 1982. "Aggregate Demand Management in Search Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 90(5), pages 881-94, October.
  26. Pissarides, Christopher A, 1976. "Job Search and Participation," Economica, London School of Economics and Political Science, vol. 43(169), pages 33-49, February.
  27. Milton Friedman, 1957. "A Theory of the Consumption Function," NBER Books, National Bureau of Economic Research, Inc, number frie57-1.
  28. Grandmont Jean-michel, 1983. "On endogenous competitive business cycles," CEPREMAP Working Papers (Couverture Orange) 8316, CEPREMAP.
  29. Stephanie Schmitt-Grohé & Martín Uribe, 2012. "Pegs, Downward Wage Rigidity, and Unemployment: The Role of Financial Structure," NBER Working Papers 18223, National Bureau of Economic Research, Inc.
  30. Robert E. Hall, 1997. "Macroeconomic Fluctuations and the Allocation of Time," NBER Working Papers 5933, National Bureau of Economic Research, Inc.
  31. Paolo Gelain & Marco Guerrazzi, 2010. "A DSGE Model from the Old Keynesian Economics: An Empirical Investigation," CDMA Working Paper Series 201014, Centre for Dynamic Macroeconomic Analysis.
  32. Merz, Monika, 1995. "Search in the labor market and the real business cycle," Journal of Monetary Economics, Elsevier, vol. 36(2), pages 269-300, November.
  33. Basu, Susanto & Fernald, John G, 1997. "Returns to Scale in U.S. Production: Estimates and Implications," Journal of Political Economy, University of Chicago Press, vol. 105(2), pages 249-83, April.
  34. Farmer, Roger E A, 2011. "The Stock Market Crash of 2008 Caused the Great Recession: Theory and Evidence," CEPR Discussion Papers 8617, C.E.P.R. Discussion Papers.
  35. Lucas, Robert Jr., 1972. "Expectations and the neutrality of money," Journal of Economic Theory, Elsevier, vol. 4(2), pages 103-124, April.
  36. Marco Guerrazzi, 2012. "The ‘Farmerian’ Approach to Ending a Finance-Induced Recession: Notes on Stability and Dynamics," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 41(1-2), pages 81-99, 02.
  37. Marco Guerrazzi, 2011. "Search And Stochastic Dynamics In The Old Keynesian Economics: A Rationale For The Shimer Puzzle," Metroeconomica, Wiley Blackwell, vol. 62(4), pages 561-586, November.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:hkm:wpaper:302012. 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: (HKIMR)

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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.