theories and methods of the business cycle. part 1: dynamic stochastic general equilibrium models
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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. - PowerPoint PPT PresentationTRANSCRIPT
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Theories and Methods of the Business Cycle.Part 1: Dynamic Stochastic General Equilibrium ModelsIII. Evaluating the RBC model
Jean-Olivier HAIRAULT, Professeur à Paris I Panthéon-Sorbonne et à l’Ecole d’Economie de Paris (EEP)
![Page 2: Theories and Methods of the Business Cycle. Part 1: Dynamic Stochastic General Equilibrium Models](https://reader033.vdocument.in/reader033/viewer/2022042616/56814e4b550346895dbbd5aa/html5/thumbnails/2.jpg)
III. Evaluating the RBC model. 1. A controversial approach
![Page 3: Theories and Methods of the Business Cycle. Part 1: Dynamic Stochastic General Equilibrium Models](https://reader033.vdocument.in/reader033/viewer/2022042616/56814e4b550346895dbbd5aa/html5/thumbnails/3.jpg)
II. Evaluating the RBC model. 1. A controversial approach
![Page 4: Theories and Methods of the Business Cycle. Part 1: Dynamic Stochastic General Equilibrium Models](https://reader033.vdocument.in/reader033/viewer/2022042616/56814e4b550346895dbbd5aa/html5/thumbnails/4.jpg)
II. Evaluating the RBC model. 1. A controversial approach
![Page 5: Theories and Methods of the Business Cycle. Part 1: Dynamic Stochastic General Equilibrium Models](https://reader033.vdocument.in/reader033/viewer/2022042616/56814e4b550346895dbbd5aa/html5/thumbnails/5.jpg)
II. Evaluating the RBC model. 2. The productivity shock
![Page 6: Theories and Methods of the Business Cycle. Part 1: Dynamic Stochastic General Equilibrium Models](https://reader033.vdocument.in/reader033/viewer/2022042616/56814e4b550346895dbbd5aa/html5/thumbnails/6.jpg)
II. Evaluating the RBC model. 2.1 The problem of volatility
![Page 7: Theories and Methods of the Business Cycle. Part 1: Dynamic Stochastic General Equilibrium Models](https://reader033.vdocument.in/reader033/viewer/2022042616/56814e4b550346895dbbd5aa/html5/thumbnails/7.jpg)
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.
![Page 8: Theories and Methods of the Business Cycle. Part 1: Dynamic Stochastic General Equilibrium Models](https://reader033.vdocument.in/reader033/viewer/2022042616/56814e4b550346895dbbd5aa/html5/thumbnails/8.jpg)
II. Evaluating the RBC model. 2.2 The problem of persistence
![Page 9: Theories and Methods of the Business Cycle. Part 1: Dynamic Stochastic General Equilibrium Models](https://reader033.vdocument.in/reader033/viewer/2022042616/56814e4b550346895dbbd5aa/html5/thumbnails/9.jpg)
II. Evaluating the RBC model. 2.2 The problem of persistence
![Page 10: Theories and Methods of the Business Cycle. Part 1: Dynamic Stochastic General Equilibrium Models](https://reader033.vdocument.in/reader033/viewer/2022042616/56814e4b550346895dbbd5aa/html5/thumbnails/10.jpg)
II. Evaluating the RBC model. 2.2 The problem of persistence
![Page 11: Theories and Methods of the Business Cycle. Part 1: Dynamic Stochastic General Equilibrium Models](https://reader033.vdocument.in/reader033/viewer/2022042616/56814e4b550346895dbbd5aa/html5/thumbnails/11.jpg)
II. Evaluating the RBC model. 2.2 The problem of persistence
![Page 12: Theories and Methods of the Business Cycle. Part 1: Dynamic Stochastic General Equilibrium Models](https://reader033.vdocument.in/reader033/viewer/2022042616/56814e4b550346895dbbd5aa/html5/thumbnails/12.jpg)
II. Evaluating the RBC model. 2.2 The problem of persistence
![Page 13: Theories and Methods of the Business Cycle. Part 1: Dynamic Stochastic General Equilibrium Models](https://reader033.vdocument.in/reader033/viewer/2022042616/56814e4b550346895dbbd5aa/html5/thumbnails/13.jpg)
II. Evaluating the RBC model. 2.2 The problem of persistence
Hump-shapedReponse of Output after ashock
![Page 14: Theories and Methods of the Business Cycle. Part 1: Dynamic Stochastic General Equilibrium Models](https://reader033.vdocument.in/reader033/viewer/2022042616/56814e4b550346895dbbd5aa/html5/thumbnails/14.jpg)
II. Evaluating the RBC model. 3. The problem of labor supply elasticity
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II. Evaluating the RBC model. 3. The problem of labor supply elasticity
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II. Evaluating the RBC model. 3. The problem of labor supply elasticity
Making your own experiment by lowering the value of eta
![Page 17: Theories and Methods of the Business Cycle. Part 1: Dynamic Stochastic General Equilibrium Models](https://reader033.vdocument.in/reader033/viewer/2022042616/56814e4b550346895dbbd5aa/html5/thumbnails/17.jpg)
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:
E
E’
E’’
w
Ns, Nd
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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.