Really Uncertain Business Cycles

Corporate Investment Over Uncertain Business Cycles

We present a dynamic model of irreversible corporate investment over the business cycle with uncertainty about the true state of the economy. We show that the firm’s optimal investment threshold, defined by the ratio of the current demand factor to the capital stock, is a concave function of the firm’s posterior probability of being in an expansion. Our model replicates some important features ...

Business cycles

This note outlines and discusses some of the strands in the post-Keynesian literature on business cycles. Most post-Keynesians have focused on endogenously generated cycles, but the mechanism varies: some focus on the goods market, others on financial markets, the labor market, or political intervention. The merits of formal modeling of the cycles have also come in for debate. 1 A slightly vers...

Growth and Business Cycles

This paper studies an agent-based model that bridges Keynesian theories of demandgeneration and Schumpeterian theories of technology-fueled economic growth. We employ the model to investigate the properties of macroeconomic dynamics and the impact of public polices on supply, demand and the “fundamentals” of the economy. We find that the complementarities between factors influencing aggregate d...

Informational Business Cycles

Real Business Cycles Theory

Research on economic fluctuations has progressed rapidly since Robert Lucas revived the profession’s interest in business cycle theory. Business cycle theory is the theory of the nature and causes of economic fluctuations The new Classical paradigm tried to account for the existence of cycles in perfectly competitive economies with rational expectations. It emphasized the role of imperfect info...