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 ...
emeryville's user avatar
  • 6,935
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 ...
Alecos Papadopoulos's 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 ...
FooBar's user avatar
  • 10.7k
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, ...
Kitsune Cavalry's user avatar
  • 6,628
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 ...
Brian Romanchuk's user avatar
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 ...
EconJohn's user avatar
  • 8,345
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 ...
Fix.B.'s user avatar
  • 2,658
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) ...
gcamilo's user avatar
  • 31
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 ...
egodig90's user avatar
2 votes

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

The distinction is between "nominal" and "real" recessions and booms. Real business cycle theory was developed to point out the fact that variations in employment and hours could occur even in an ...
Ege Erdil's user avatar
  • 691
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 ...
1muflon1's user avatar
  • 56.4k
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 ...
heh's user avatar
  • 1,808
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 ...
1muflon1's user avatar
  • 56.4k
1 vote
Accepted

Proof of the Lucas' Cost of Business Cycles

I'll first present the assumptions Lucas made. First assume $$ c_t = Ae^{\mu t}e^{-(1/2)\sigma^2}\varepsilon_t, $$ where $\log \varepsilon_t \sim N(0, \sigma^2)$. Under these assumptions, we have $\...
Wittgenstein's Poker's user avatar
1 vote

How do economists compute new hires by demographic group?

There is no problem calculating the number of hires or the job-finding rate within different sub-groups of the population. Usually one wants to have individual panel data to observe labor market ...
Papayapap's user avatar
  • 1,843
1 vote

What does it mean to detrend a time series at a given rate?

My best guess is that they detrended by computing the discounted value. (Although I'm not sure if this is really what they've done.) Let $r = 0.015$ be the growth rate and let $t$ be the time period ...
tdm's user avatar
  • 12k
1 vote

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

Your idea that unmaintend equipment costs nothing is also unrealistic. The major industry included in the \$2T bailout/stimulus is the airline industry. Planes left on the ground still require ...
the gods from engineering's user avatar
1 vote
Accepted

Am I correct that cyclical unemployment can be negative?

Cyclical unemployment $U^C$ is by definition difference between actual observed rate of employment $U$ and the natural rate of employment $U^N$ so we have: $U^C_t \equiv U_t-U_t^N$, see for example ...
1muflon1's user avatar
  • 56.4k
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 ...
1muflon1's user avatar
  • 56.4k
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 ...
Art's user avatar
  • 2,784
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 ...
Brian Romanchuk's 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 ...
Angela Pretorius's 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, ...
BB King's user avatar
  • 6,148
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 ...
Dan's user avatar
  • 1,356
1 vote
Accepted

Understanding the HP Filter

The function $\tau$ is the 'line of best fit', the growth trend. The 'residual' $y-\tau$ is the output gap. So, $\tau$ detrends $y$ over time, to give the detrended business cycle $y-\tau$. $\quad y-\...
ahorn's user avatar
  • 1,230
1 vote
Accepted

Using metrics provided by FRED to identify the business cycle

Identifying business cycles or short/medium fluctuations of an economy can be quite hard. In business cycle theory it's pretty common to use the Hodrick-Prescott-Filter to identify short term (...
PAS's user avatar
  • 349
1 vote

Using metrics provided by FRED to identify the business cycle

Prediction is difficult, especially about the future. (Berra, Goldwyn, Bohr et al.) The problem with noting that recessions often occur immediately after low periods of unemployment is that you do ...
Henry's user avatar
  • 4,765

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