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Impulse or propagation? How the tides turned in Business Cycle Theory

  • J.P.G. Reijnders
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    This paper contains a short history of business cycle theory. It is argued that in the course of time the emphasis shifted from a mainly exogenous to a mainly endogenous explanation of the cycle. After the integration of the two approaches in the so-called impulse and propagation theory, the balance kept shifting between an emphasis on endogenous propagation mechanism (Keynesians), the exogenous impulse mechanism (New Classicals) and back again to the propagation mechanism (New Keynesians). The shifts in emphasis in theory are accompanied by changes in the perceived window of opportunity for economic policy.

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    File URL: http://dspace.library.uu.nl/bitstream/handle/1874/31462/07-07.pdf
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    Paper provided by Utrecht School of Economics in its series Working Papers with number 07-07.

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    Length: 24 pages
    Date of creation: 2007
    Date of revision:
    Handle: RePEc:use:tkiwps:0707
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    1. Plosser, Charles I, 1989. "Understanding Real Business Cycles," Journal of Economic Perspectives, American Economic Association, vol. 3(3), pages 51-77, Summer.
    2. Nelson, Charles R. & Plosser, Charles I., 1982. "Trends and random walks in macroeconmic time series : Some evidence and implications," Journal of Monetary Economics, Elsevier, vol. 10(2), pages 139-162.
    3. Cooley, Thomas F, 1997. "Calibrated Models," Oxford Review of Economic Policy, Oxford University Press, vol. 13(3), pages 55-69, Autumn.
    4. Akerlof, George A & Yellen, Janet L, 1985. "A Near-rational Model of the Business Cycle, with Wage and Price Intertia," The Quarterly Journal of Economics, MIT Press, vol. 100(5), pages 823-38, Supp..
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    8. Blackburn, Keith, 1987. " Macroeconomic Policy Evaluation and Optimal Control Theory: A Critical Review of Some Recent Developments," Journal of Economic Surveys, Wiley Blackwell, vol. 1(2), pages 113-48.
    9. Parkin, Michael, 1986. "The Output-Inflation Trade-off When Prices Are Costly to Change," Journal of Political Economy, University of Chicago Press, vol. 94(1), pages 200-224, February.
    10. Lucas, Robert Jr, 1976. "Econometric policy evaluation: A critique," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 1(1), pages 19-46, January.
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    16. 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.
    17. Edmund S. Phelps, 1968. "Money-Wage Dynamics and Labor-Market Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 76, pages 678.
    18. Satyajit Chatterjee, 2000. "From cycles to shocks: progress in business-cycle theory," Business Review, Federal Reserve Bank of Philadelphia, issue Mar, pages 27-37.
    19. 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 473-91, June.
    20. Lawrence F. Katz, 1988. "Some recent developments in labor economics and their implications for macroeconomics," Proceedings, Federal Reserve Bank of Cleveland, pages 507-530.
    21. Blanchard, Olivier Jean & Quah, Danny, 1993. "The Dynamic Effects of Aggregate Demand and Supply Disturbances: Reply," American Economic Review, American Economic Association, vol. 83(3), pages 653-58, June.
    22. Lucas, Robert E, Jr, 1975. "An Equilibrium Model of the Business Cycle," Journal of Political Economy, University of Chicago Press, vol. 83(6), pages 1113-44, December.
    23. Mankiw, N Gregory, 1985. "Small Menu Costs and Large Business Cycles: A Macroeconomic Model," The Quarterly Journal of Economics, MIT Press, vol. 100(2), pages 529-38, May.
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