# Questions tagged [business-cycles]

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### Schumpeterian Business Cycles

The basic idea of Schumpeterian Business Cycles is that new technologies require creative destruction but will yield positive growth. These two opposing forces have impacts onto the real economy at ...
2answers
922 views

### Simulating Real Business Cycle

Basically I need to replicate Hartley's 'A User's Guide to Solving Real Business Cycle Models' (http://www.econ.ucdavis.edu/faculty/kdsalyer/LECTURES/Ecn235a/Linearization/ugfinal.pdf). Specifically, ...
1answer
11k views

### No Ponzi game condition and transversality condition are the same?

Given the following non-stochastic planning problem with finite horizon, \begin{align} &\max_{\{k_{t+1}\}}\sum^T_{t=0}\beta^tU[f(k_t-k_{t+1})] \\ \text{s.t. } & 0\leq k_{t+1}\leq f(k_t)\\ &...
1answer
192 views

### Credit Frictions as the source of Business Cycles

Many papers look at the impact of credit frictions onto business cycles, and they almost unambiguously find that credit frictions work as an amplification mechanism of other shocks. For example, ...
2answers
89 views

### What fraction of new businesses die out within a year?

Is there a simple way to figure out how many new businesses appear and disappear each year in the US economy? It seems a key question to figure out how the economy is changing over time, although I ...
2answers
115 views

### Overview: Crises and their causes

There have been many business cycles in the US over the past 50 years (although less so since the great moderation). Many of us youngsters are too young to remember many of these. Is there some ...
4answers
507 views

### Lucas Cost of Business Cycles

I am trying to understand the logic behind Lucas attempting to analyse the potential benefits of eliminating business cycles by attempting to calculate the percentage of income that individuals would ...
1answer
445 views

### Are profits procyclical?

This is somewhat related, but distinct from Cyclicality of Markups Basically, I'm looking for papers on whether firms profits are (on average) procyclical or not, and I appreciate theoretical, but ...
1answer
126 views

### Does RBC models pin down equilibrium output, amount of labor and capital without initial condition?

In ordinary equilibrium models, we can pin down equilibrium quantity by supply-demand functions. Is this the same in RBC models? Can we pin down equilibrium output and amount of labor and capital ...
3answers
132 views

### Can the coming recession - or any recession - be avoided?

I keep reading about all these warning signs of a coming recession, and I have a very silly question: If we can see it coming, why can't we do something about it now, instead of after we are deep in ...
1answer
71 views

### Firm Sizes over the business cycle

There has been a lot of evidence about the firm size distribution (as measured in employment) being Pareto (see for example Luttmer 2007), but what are the properties of this distribution over the ...
1answer
279 views

### Is the basic RBC model a weak model?

There are a plethora of examples of weaknesses in my textbook, such as: The Walrasian assumption Not including nominal shocks Not including indivisible labour Not including distortionary taxes Not ...
1answer
240 views

### Is the S&P 500 now in a boom-bust cycle?

This question was originally posted at money.stackexchange but was moved here per a commentor's suggestion after the question was put on hold for being opinion-based. The original question was: ...
2answers
105 views

### Who first formulated the Political Business Cycle Theory?

The first time I saw it, was in Stephen Harper's Master's Thesis http://dspace.ucalgary.ca/bitstream/1880/24345/1/1991_Harper.pdf It comes across as being very similar to the Austrian Business Cycle ...
2answers
344 views

### Using metrics provided by FRED to identify the business cycle

I am interested to see how the "business cycle" is associated with our firms sales. The hope is that if we can show that our sales line up with the business cycle then we can make decisions ...
1answer
401 views

### Understanding the HP Filter

The HP Filter has two objectives, with the importance of each objective denoted by the user given value of lambda: Objective 1: minimize the $\tau_t$ in the term in the square brackets such that we ...
2answers
438 views

### Hypothetical Long-term Business Cycle

I was looking through my textbook on Money, Banking, and the Economy and I came to the chart of the hypothetical short-term business cycle deviating around an upward sloping long-term cycle trend. My ...
0answers
107 views

### Kiyotaki-Moore v.s. Bernanke-Gertler-Gilchrist - what's the difference?

What are the key differences between (i) a model which features a "Kiyotaki-Moore collateral constraint"; and (ii) a model which incorporates a "financial accelerator" (a la Bernanke-Gertler-Gilchrist)...
0answers
22 views

### Are there times when firms compete more with each other?

I have the impression that sometimes firms are fiercely competing with each other, innovating and trying to gain market share and other times when firms are just hanging on. Are there any references ...
0answers
49 views

### Separation shock and business cycles

In the context of the Diamonds-Mortensen-Pissarides models, there was a reasoning why a separation shock cannot fit business cycles. I think it was brought forward by Shimer, but I could be wrong. ...
3answers
57 views

### Model of economic cycles consistent with efficient market hypothesis

I do not have background in economics, so my question may be naive or I might have taken incorrect assumptions somewhere. As far as I understand, efficient market hypothesis applies, saying that the ...
1answer
29 views

### Question Regarding 'Potential Output'

I am learning about potential output. We have been told that it is the amount of output that an economy can produce when using its resources, such as capital and labour, at normal rates/maximum ...
1answer
24 views

### Are business cycle fluctuations usually studied in a (New Keynesian) DSGE model, or can they also be studied in a growth model?

I wonder if business cycle fluctuations are usually studied in a (New Keynesian) DSGE model, or can they also be studied in a growth model?
1answer
217 views

### Am I correct that cyclical unemployment can be negative?

Let's start with stating and emphasizing some truths that we will need later. Overall unemployment rate=Frictional unemployment + Structural unemployment + Cyclical unemployment. Also, Natural rate of ...
2answers
39 views

### Empirical research into sectoral comovement

I'm looking for some empirical studies into sectoral comovement. In particular, I'm interested in how manufacturing and services industries move together both in the long run and over the course of a ...
1answer
15 views

### Why are real interest rates so non-volatile compared to investment?

Intuitively I would guess that real interest rates are highly related to investment. But there is a very low interest rate volatility, compared to investment: log investment is about 20 times more ...
1answer
2k views

### What are the assumptions of real business cycle theory and Keynesian theory?

What are the differences between the approaches of Keynes and Real Business Cycle theorists? What are the assumptions made by both the theories? How do they differ in their methodology? Do they ...
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14 views

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### Lack of historical data for calibration of probability of default

It is a known fact that default rates seem to exhibit cyclic behavior. Most probability of default models use one-year averages of default rates to calibrate the models. The one-year averages should ...
1answer
5k views

### The period of the business cycle in which the real GDP is increasing is called the?

The period of the business cycle in which the real GDP is increasing is called the? And no, this is not an homework question. I'm a college student and we starting our exams soon. I'm just going ...
0answers
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1answer
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### extensive vs intensive labor in US in recent decades

Total Hours worked is a mix of extensive (to work or not, the usual standard working week) and intensive (how many hours to work). I'm interested in how this balance of extensive and intensive ...
2answers
75 views

### Inflation leads to loss of gold reserves

I am reading Murray's Rothbard What has government done to our money? and this is his reasoning for inflation leading to loss of gold reserves to other countries (...
1answer
75 views

### On a Dalio youtube video

The following video https://www.youtube.com/watch?v=PHe0bXAIuk0 argues that credit is the principal force behind the business cycle. Is this considered to be a established truth within some school ...
1answer
68 views

### Causality: Money supply and prices

When there is an increase in price level, real money supply decreases and raises interest rates. In a similar situation, when money supply decreases, interest rates increases, consumption decreases, ...