The ABCs of RBCs: An Introduction to Dynamic Macroeconomic Models, 2008, 421pages, George T. McCandless, 0674028147, 9780674028142, Harvard UniversityPress, 2008

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The ABCs of RBCs is the first book to provide a basic introduction to Real Business Cycle (RBC) andNew-Keynesian models. These models argue that random shocks—new inventions, droughts, andwars, in the case of pure RBC models, and monetary and fiscal policy and international investorrisk aversion, in more open interpretations—can trigger booms and recessions and can accountfor much of observed output volatility. George McCandless works through a sequence of these RealBusiness Cycle and New-Keynesian dynamic stochastic general equilibrium models in fine detail,showing how to solve them, and how to add important extensions to the basic model, such asmoney, price and wage rigidities, financial markets, and an open economy. The impulse responsefunctions of each new model show how the added feature changes the dynamics. The ABCs ofRBCs is designed to teach the economic practitioner or student how to build simple RBC models.Matlab code for solving many of the models is provided, and careful readers should be able toconstruct, solve, and use their own models. In the tradition of the “freshwater” economicschools of Chicago and Minnesota, McCandless enhances the methods and sophistication of currentmacroeconomic modeling.

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