11 votes
Accepted

Schumpeterian Business Cycles

I will toot my own horn and cite - Phillips and Wrase. (2006) "Is Schumpeterian ‘Creative Destruction’ a Plausible Source of Endogenous Real Business Cycle Shocks?," Journal of Economic Dynamics and ...
user avatar
10 votes
Accepted

What fraction of new businesses die out within a year?

The Business Dynamics Statistics (BDS) of the Census provides annual measures of business dynamics (such as job creation and destruction, establishment births and deaths, and firm startups and ...
user avatar
  • 6,652
9 votes

Schumpeterian Business Cycles

There have been examples of some papers that incorporate these ideas. They are typically housed within the endogenous growth literature. Off the top of my head, these are the papers that I think of: ...
user avatar
  • 1,573
8 votes
Accepted

No Ponzi game condition and transversality condition are the same?

Is it right to interpret the no Ponzi game condition as a finite horizon version of the transversality condition? No. The "No-Ponzi-Game" or "solvency" condition is an external constraint imposed ...
user avatar
7 votes
Accepted

Is the basic RBC model a weak model?

When is a model really weak? A model is an abstraction of reality, to explain a part of it. A model is weak when it cannot explain what it's supposed to be explaining. Just adding features to a model ...
user avatar
  • 10.4k
6 votes
Accepted

Simulating Real Business Cycle

Explosiveness The paper contains an error, which causes the explosive dynamics in your simulation (although presumably the underlying computations in the paper were correct). The equilibrium ...
user avatar
  • 1,036
5 votes

Simulating Real Business Cycle

Final NEWS March 20, 2015 : I have e-mailed prof. K. Salyer, one of the authors of the User Guide. In a repeated communication, he verified that both issues (see my answer below, as well as @ivansml ...
user avatar
5 votes
Accepted

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

Here's the Efficient Market Hypothesis (EMH) explanation for why one cannot say that a correction is overdue: Suppose that it were widely known that, by looking at the above figure, one could ...
user avatar
  • 16.6k
5 votes
Accepted

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

The stock of capital in the RBC model is a predetermined state variable, meaning that the capital $K_t$ available at time $t$ was determined at time $t-1$. Usually we have an accumulation relation of ...
user avatar
4 votes
Accepted

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

So here is the unpleasant truth about recessions. "The economy" as a whole consists is a broad term that in all forms, will always be comprised of so many moving parts, so many transactions, ...
user avatar
  • 6,409
4 votes

Overview: Crises and their causes

Manias, Panics, and Crashes by Charles Kindleberger (Full book pdf) An easier reading compared to Reinhart and Rogoff. It informally explains how crises occur and presents some famous examples.
user avatar
4 votes
Accepted

Austrian business cycle

As a disclaimer, I think the Austrian business cycle is incorrect. I will try to explain in a sympathetic fashion. Mises.org has a great deal of resources on Austrian economics, much of it free. From ...
user avatar
3 votes

Lucas Cost of Business Cycles

The Lucas model does not address at all the points that you address of people losing jobs, as it utilizes just one agent that simply has a perfectly steady (perhaps growing at a constant rate) ...
user avatar
  • 31
3 votes

Credit Frictions as the source of Business Cycles

Yes credit frictions do have an amplifying effect on supply shocks while they often attenuate demand shocks and they also give increased persistent to the effects of the supply shocks in many models. ...
user avatar
  • 396
3 votes

Firm Sizes over the business cycle

These guys (paper) claim the distribution is still power-law, but steeper in recessions and flatter in booms. [Content added after suggestion] While it is well known that the distribution of firm ...
user avatar
  • 2,590
3 votes

Austrian business cycle

I too also think the austrian theory of the business cycle is incorrect but will offer a sympathetic answer. It really about understanding how the theory related to the structure of production and how ...
user avatar
  • 7,725
2 votes

Are profits procyclical?

My reading is yes, it is procyclical in levels and margins. This paper uses industry and firm data to look at price cost mark-ups and firm profit margins in U.K. manufacturing and services. In ...
user avatar
  • 15.9k
2 votes

Overview: Crises and their causes

This Time Is Different by Reinhart and Rogoff Detailed, structured, and comprehensive. A brief paper by the same authors on the same topic: This Time is Different: A Panoramic View of Eight ...
user avatar
2 votes

Who first formulated the Political Business Cycle Theory?

The first scholar to model the intuition behind the political business cycle is William Nordhaus in a REStud article (1975). Nordhaus (1975) is thus widely believed to be the seminal article in the ...
user avatar
2 votes

Who first formulated the Political Business Cycle Theory?

Quick Wikipedia found : https://en.wikipedia.org/wiki/Business_cycle Look at the section of Politically based business cycle The political business cycle theory is strongly linked to the name of ...
user avatar
  • 835
2 votes

Model of economic cycles consistent with efficient market hypothesis

The EMH applies to assets, not just stocks, and its implications are more relevant for investors who own part of the market - not the entire thing. This is important, because it's the difference ...
user avatar
  • 1,798
2 votes

Why does global suspension of economic activity result in catastrophic loss/debt?

It creates losses. First, many businesses don’t own their own building/land/equipment. It’s very common to lease these things. Moreover, many business take out insurance that again has to be paid on ...
user avatar
  • 43.5k
2 votes
Accepted

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

Business cycle fluctuations can be studied in many ways including also growth models. An example of using growth model to study business cycle would be this 1995 paper by Cho & Cooley. This being ...
user avatar
  • 43.5k
1 vote
Accepted

Model of economic cycles consistent with efficient market hypothesis

If you want some simple model of stock prices consistent with efficient market hypothesis it would be random walk: $$p_{t+1}= a+ p_t +\epsilon_t$$ You don’t even need to model cycles there ...
user avatar
  • 43.5k
1 vote

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

Most of the arguments I see saying that the recession is coming simply says that it's been long enough that we haven't had a recession, the last recession was more than ten years ago, the average ...
user avatar
  • 2,764
1 vote
Accepted

On a Dalio youtube video

I think this question is too open-ended and unqualified. One can point to two economists in particular who highlight the importance of debt in the cycle - Hyman Minsky and Steve Keen. Both of these ...
user avatar
1 vote

Inflation leads to loss of gold reserves

Inflation won't necessarily change the price of goods from country B in real terms, but it will change the relative costs of buying goods from country B now vs saving now and buying goods from country ...
user avatar
1 vote

Empirical research into sectoral comovement

A relevant paper could be: Veldkamp, Laura & Wolfers, Justin, 2007. "Aggregate shocks or aggregate information? Costly information and business cycle comovement," Journal of Monetary Economics, ...
user avatar
  • 5,434
1 vote

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

In most countries, interest rates are actively managed by the government or central bank in pursuit of various policy objectives (some closely linked to investment, some, like stable foreign exchange ...
user avatar
  • 1,346

Only top scored, non community-wiki answers of a minimum length are eligible