TECHNOLOGY AND BUSINESS CYCLES : HOW WELL DO STANDARD MODELS EXPLAIN THE FACTS ?

@inproceedings{Basu1998TECHNOLOGYAB,
  title={TECHNOLOGY AND BUSINESS CYCLES : HOW WELL DO STANDARD MODELS EXPLAIN THE FACTS ?},
  author={Susanto Basu},
  year={1998}
}
How well do current business-cycle models explain historical output fluctuations? Almost a decade has passed since Plosser (1989) claimed that a simple real-business-cycle (RBC) model could generate simulated output with a correlation of 0.87 with actual output over the period since the Korean War. A similar observation led Prescott (1986) to claim that theory is ahead of business-cycle measurement. This paper revisits Plosser’s exercise, using some recent innovations in business-cycle theory… CONTINUE READING

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