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Theories and Methods of the Business Cycle. Part 1: Dynamic Stochastic General Equilibrium Models

Theories and Methods of the Business Cycle. Part 1: Dynamic Stochastic General Equilibrium Models III. Evaluating the RBC model Jean-Olivier HAIRAULT , Professeur à Paris I Panthéon-Sorbonne et à l’Ecole d’Economie de Paris (EEP). III. Evaluating the RBC model. 1. A controversial approach.

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Theories and Methods of the Business Cycle. Part 1: Dynamic Stochastic General Equilibrium Models

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  1. Theories and Methods of the Business Cycle. Part 1: Dynamic Stochastic General Equilibrium Models III. Evaluating the RBC model Jean-Olivier HAIRAULT, Professeur à Paris I Panthéon-Sorbonne et à l’Ecole d’Economie de Paris (EEP)

  2. III. Evaluating the RBC model. 1. A controversial approach

  3. II. Evaluating the RBC model. 1. A controversial approach

  4. II. Evaluating the RBC model. 1. A controversial approach

  5. II. Evaluating the RBC model. 2. The productivity shock

  6. II. Evaluating the RBC model. 2.1 The problem of volatility

  7. II. Evaluating the RBC model. 2.1 The problem of volatility • Make your own experiment sdepsilona=.0012 • The variance of output is approximately divided by 6 • Changes in the variance of the productivity shock work to rescale the aggregate fluctuations. • But at this point nothing in the model explain how to correct the measurement of the SR.

  8. II. Evaluating the RBC model. 2.2 The problem of persistence

  9. II. Evaluating the RBC model. 2.2 The problem of persistence

  10. II. Evaluating the RBC model. 2.2 The problem of persistence

  11. II. Evaluating the RBC model. 2.2 The problem of persistence

  12. II. Evaluating the RBC model. 2.2 The problem of persistence

  13. II. Evaluating the RBC model. 2.2 The problem of persistence Hump-shaped Reponse of Output after a shock

  14. II. Evaluating the RBC model. 3. The problem of labor supply elasticity

  15. II. Evaluating the RBC model. 3. The problem of labor supply elasticity

  16. II. Evaluating the RBC model. 3. The problem of labor supply elasticity • Making your own experiment by lowering the value of eta

  17. II. Evaluating the RBC model. 4. The problem of the correlation between labor and wages • Productivity shocks lead to a strong positive correlation between labor and wages at odds with facts (roughly zero in US, negative in European countries). • Results: w E’ E E’’ Ns, Nd

  18. III. Evaluating the RBC model. 5. RBC or DGSE models? • Two kinds of responses • Some criticisms have been adressed in the RBC theory, ie. Models where productivity shocks are the main perturbation of optimal fluctuations. • Some criticisms have led to take into account new-keynesian features as nominal and real rigidities in DGSE models.

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