This paper constructs a model economy to explain how uncertainty shocks can cause business cycle fluctuations. In the model, during times of high uncertainty, the representative agent, due to risk aversion motives, moves resources from a high risk/high return production process to a low risk/low return production process. High uncertainty thus causes the firm level technology frontier to endoge...

This paper is intended to be pedagogical rather than a presentation of original research. We describe a simple dynamic, stochastic general equilibrium (DSGE) model with capital utilization, capital adjustment costs, and a simple Cobb-Douglas technology to illustrate how DSGE models can be used to explain the past and to forecast the future. We identify one method to directly estimate latent var...

When capacity utilization is allowed to vary, standard equilibrium theory predicts that demand shocks can generate not only closed-economy business cycles that are previously thought explainable only by technology shocks, but also international business cycles that are more consistent with the data than what can be generated by technology shocks. JEL classi ̄cation: E13, E32, F11, F41.

The neoclassical e®ects of permanent technology shocks on employment is re-investigated. Contrary to Jordi Gali's (1999) assertion published in this Review, I show that standard neoclassical theory is fully capable of explaining the stylized fact that positive permanent technology shocks reduce employment and that positive transitory nontechnology shocks increase labor productivity.

This paper studies a general equilibrium model that is consistent with recent empirical evidence showing that the U.S. price level and in‡ation are much more responsive to aggregate technology shocks than to monetary policy shocks. Speci…cally, we show that the fact that aggregate technology shocks are more volatile than monetary policy shocks induces …rms to pay more attention to the former th...

generally, developing countries are not able to invest enough on r&d; therefore, they try to get benefit from knowledge spillover, as an external r&d.; this paper tries to investigate the impact of r&d; expenditures and imported intermediate goods, as a proxy for technology imports, on value added of iranian industries. to that end, we use a panel data set of iranian two-digit isic manufacturin...

Recently there has been renewed interest in assessing economic models in the context of specific, empirically identified economic shocks. Typically, these shocks are identified one-at-a-time, ignoring potential correlations across shocks, or are identified in the context of a structural vector autoregression (SVAR) using zero restrictions only loosely tied to economic theory. In this paper, we ...

Abstract In this paper we test two versions of convergence hypothesis namely deterministic or conditional convergence and stochastic or catching up hypothesis using Carrion-i-Silvestre et al. (2005) stationary test. The results show Latin and South American countries (LSA) catching up process toward the USA failed in 1980s and somewhat in 1990s. But in 2000s most of them could lie in converge...

stochastic, processes can be stationary or nonstationary. they depend on the magnitude of shocks. in other words, in an auto regressive model of order one, the estimated coefficient is not constant. another finding of this paper is the relation between estimated coefficients and residuals. we also develop a catastrophe and chaos theory for change of roots from stationary to a nonstationary one ...