Teaching Real Business Cycles to Undergraduates
We start by reviewing the graphical approach to teaching the real business cycle model introduced in Barro (1984). We then look at where this approach cuts corners and suggest refinements. Finally, graphical and exact models are compared by means of impulse response functions. The graphical models yield reliable qualitative results. Sizable quantitative differences exist, but these can partly be remedied by adding appropriate refinements. Used by experienced instructors the graphical analysis of the real business cycle equips students with a first understanding of the economy‘s supply side and generates results that will survive closer scrutiny later in the curriculum.
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- 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.
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